Stop us if you’ve heard this one:
I haven’t been in an accident in over 5 years and haven’t even been pulled over in forever. My cars are all decked out in safety features. But my insurance rates went up by a few hundred dollars at renewal. I can’t believe this!
We have had this conversation many times since the beginning of this year, and it never gets any easier. While local, experienced insurance agents always work hard to get our clients the most affordable insurance rates for the right level of coverage, everything really is that expensive right now. There are several reasons for these rising rates, which is why they seem to have jumped so high for so many drivers this year.
Economic Inflation is Driving Up the Cost of Coverage
It’s no secret that everything is more expensive this year. There is a new social media trend of people posting side by side pictures of grocery receipts from a year apart to show how muchprices have gone up. When the cost of doing business increases, consumers unfortunately pay more.
In the insurance industry, some of the inflation is driven by recovering losses from the last few years. We have been in a hard market for over a year due to insurance carriers paying out more in claims than they had collected in premiums. Not only are the carriers trying to cover the losses, but they also need to rebuild the communal funds to prevent ongoing losses.
Unless claims come down or the economy deflates a bit, insurance companies will maintain higher premiums.
The High Cost of Repairs and Labor Means Higher Insurance Rates
Obviously, the economy affects every industry that is connected to insurance. We are still dealing with the effects of supply chain disruptions from Covid, and inflation is driving up the cost of labor. Every claim made against a car insurance policy is more expensive to resolve than it was just three years ago.
Not only are claims more expensive, but the number of claims has risen quite a bit in recent years. A LexisNexis Auto Insurance Trends Report highlights how all of these factors arecreating this high cost environment.
There was a sharp decrease in crashes and driving violations during 2020 and 2021. Those numbers are all right back up to 2019 levels, and still increasing. More people are driving distracted, impaired, and recklessly in the past two years. Unsafe drivers cause crashes, and more crashes means more insurance claims. We have also seen more cars destroyed by natural disasters and major storm damage than in the past.
Other factors that are driving the high cost of claims include:
On the individual level, a lot of people still drive safely and take care of their vehicles. Unfortunately, they end up having to help cover the cost of those who disregard the value of risk-benefit analysis in driving. This also includes the high number of uninsured and underinsured drivers on the road today.
If you are a parent of teens or young adult drivers, it is very important to make sure they understand how their driving habits contribute to the overall safety of the roads and insurance costs. Consider professional driving instruction, even if your young driver already has a license. It’s never too late to become a safer driver. If you suspect that your independent young adult kids don’t have adequate insurance, encourage them to contact a local agent for a review. We understand their economic stress and can help them get a realistic grasp on the cost of premiums verses out of pocket expenses in the event of a claim.
Litigation Affects Auto Insurance Rates
Have you ever taken a few minutes to really think about how lawsuits affect insurance rates? Not everyone puts the two together, but attorneys have a huge impact on the cost of insurance.
The same LexisNexis Auto Trends Report mentioned that more claims associated with car crashes involve attorneys these days. When lawyers get involved, insurance companies pay more. Hiring an attorney to litigate an auto insurance claim is not necessarily a bad thing. Lawyers often help injured people consider their long-term medical expenses and lost wages after an accident. They pursue a financial award that is designed to cover those ongoing needs. In many cases, this is the best possible outcome for the injured person.
The fact remains however, that the more auto insurance claims enter into the court process, the higher payouts will trend. The insurance industry has to take this fact into account when forecasting policy prices. In a more litigious environment, insurance premiums will remain high.
Will Auto Insurance Prices Ever Come Down?
One piece of good news in all of this economic drama is that Pennsylvania car insurance rates are nowhere near the high end of national rates. Pennsylvania’s full coverage rate average is under $1500 per year, putting us in the bottom 20 states for premiums.
While we can’t know when prices will at least stabilize, if not start coming down, we can keep an eye on some indicators. First, the industry is watching for inflation to settle down. Second, we are keeping an eye on legislation that will tackle abusive litigation practices. Finally, we can all commit to being safe drivers who obey the law and avoid distracted or impaired driving.
Smyrl Insurance has been helping drivers, homeowners, and business owners obtain affordable, adequate coverage for over 65 years. We are local, experienced agents who understand the needs and concerns of our neighbors. We are very well aware of the economic hardships our clientsface, and we work hard to educate, nurture, and empower people through insurance so that they can make informed decisions about how they protect their cars, homes, and businesses. Contact us to review your current policies, explore options to reduce costs, and confirm that you have the coverage you need. We serve clients for auto, homeowner, renters, life, and other types of insurance in Hatfield, Lansdale, Souderton, Harleysville, and throughout the region in Montgomery County and Bucks County, Pennsylvania.
