Why Do Auto Insurance Rates Keep Increasing?

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Car insurance premiums are going up and up and they are showing no sign of stopping anytime soon.

COVID and the pandemic has played a huge role in this as well as a number of other factors, partly related to COVID, such as supply chain issues, labor shortages, and also inflation.

It’s important to realize that insurance is a numbers and data game. These insurance companies are not going to increase your auto insurance rates for no reason. They’re also not going to lower them for no reason.

They’re going to look at the numbers and the data and adjust rates accordingly. And right now the numbers and the data has your insurance rates going up.

So today, I’m going to go over five reasons why your auto insurance rate keeps increasing every time you get that renewal in the mail.

The demand for used cars is high.

It’s extremely high. You’ve probably noticed this if you’ve gone to buy a new used car, anytime lately.

You may have even noticed that dealerships are reaching out to you to try to buy back your used car that you’ve only had for a year or two.

There has been a 13% decline in new car sales if you compare quarter three of this year, 2021 verse quarter three of last year, 2020. New cars are not being sold nearly as much as they were last year at the time. This is in part due to shortages of chips and raw materials, which I’m sure you guys have heard about in the news.

Overall supply chain issues have made it really hard to manufacture and get these new cars on the lot for you to buy. This has led to a 50% increase or jump in used car sales from the beginning of 2020 to quarter three of 2021. That’s a huge increase.

And so how does this affect your insurance rates? Total loss payouts. Total loss is when the insurance company says your vehicle is not worth the amount it would take to repair your used vehicle. So they just give you a check for your vehicle rather than fixing it.

Because your used vehicle is now worth a lot more than it was from the beginning of 2020, insurance companies are having to cut checks that are a lot greater now than they were in the beginning of 2020.

The cost to repair your vehicle is going up.

Overall this year, there is a 6% increase in the price per part that the body shop needs to fix your vehicle. Supply chain issues and more technically complex vehicles have also contributed to this rise in insurance premiums, because it’s costing more to repair your vehicle.

The time to repair your vehicle has also increased as well. This is in due again to supply chain issues. They can’t get the parts there to repair your vehicle. So that of course, increases your insurance premium.

But then on top of that, most people that have full coverage on their insurance policy have what’s called rental car reimbursement. So if your car is damaged, while it’s in the shop being fixed, the insurance company is going to pay for you to have a rental car.

The average time that an insured needs a rental car has increased by three from October of 2020 to October of 2021.

The insurance company is now having to pay more money so that you can have your rental car while your car is in the shop getting fixed.

Another problem that this is causing is most, if not all insurance policies only give you up to 30 days to have a rental car. Some of these repair shops are backed up 60 days to 90 days. And so they have their 30 day limit and they have to give their car back, but their car is still not fixed. This is an issue.

This isn’t necessarily affecting your insurance premiums, but it is an issue because people suddenly don’t have a car to drive. The insurance company gets blamed, even though this isn’t their fault.

The number of skilled auto technicians is decreasing.

It’s becoming more difficult and costly to find and train skilled auto technicians. You’ve probably seen it in the news. There are small businesses, restaurants, a number of different places that are having to shut down because the labor force is not there. They can’t find people to come and work for them.

The same thing is happening in the auto repair industry. There’s not enough people to fix your car and to fix it quickly. These auto repair shops are doing everything they can to stay in business. Sometimes in order to stay in business, you have to raise your prices. So because their prices are being raised, they’re charging insurance companies more. Because insurance companies are having to pay more, they’re passing those costs onto you, and your auto insurance premium is increasing.

Bodily injury claims are on the rise.

This is in part to two things. The first thing is there has been a 7% increase just in this year of 2021 for treatment. On top of that, there was a 6% increase in 2020.

This is happening for two specific reasons. The first reason is more and more people are getting legal help. They’re hiring a personal injury attorney to represent them. Of course, a personal injury attorney is generally going to get more money from the claim than you if you didn’t hire one. That’s a whole other story. We won’t go into more detail there.

And the second part is just overall health costs because everything is going up just like we’re talking about auto insurance rates. Everything is going up. Treatment costs are also going up. How does this affect you as the person paying insurance premiums? Well, one of the insurance companies main expenses is paying out for bodily injury claims. Those costs are going up, and so your insurance premiums are going up as well.

Distracted Drivers.

Guys, you may not admit you’ve done it, but you probably have. Texting and driving or any other type of distracted driving. The numbers are higher than ever. And it’s becoming an issue. Accidents occur because people are distracted. They’re talking on their phone, they’re looking at their phone, they’re texting while driving, whatever the case may be.

This is causing more accidents, which then leads to all the other things we’ve talked about. Best thing you can do is to not drive distracted. If you’re not driving distracted, you’re not going to hit somebody. And also, if you’re not driving distracted, you’re going to see someone that’s driving distracted and be able to avoid that person.

All the other factors listed above can’t really be changed by you alone.

But the one thing that you can change is to not drive distracted and that overall, over time will help your auto insurance premiums decrease.

But I’m A Good Driver!

So you may be thinking to yourself, you listed these five reasons, these five reasons aren’t my problem. I don’t have accidents. I’ve never had an accident. I’ve been driving for 25 years and I’ve never had an accident. So why do I, the perfect driver, have to pay more for auto insurance?

Well, remember we talked about the fact that insurance is number and data driven. You’re in a pool with all of these people. Remember, the insurance companies don’t just insure you, they insure everybody. And they take that premium that everybody pays and pool it together. Then when someone has an accident, they take that premium and they use it to pay out claims. So the fact that you are a very good driver, yes, I believe you, but for every good, awesome driver like you, there’s a horrible driver who’s in that pool.

And unfortunately, that’s just how insurance works. Your premiums go to pay for that horrible driver.

Those are the five reasons why your auto insurance premium is increasing. I know you don’t like it. It’s never a fun conversation to have. But I will say this, if you have not checked insurance rates in the past two years, it’s time that you speak with a broker.

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