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  • Writer's picturejoseph retcho

Rising Insurance Cost 2023


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If you haven't already received notification that your auto insurance rate is rising, you should.


Data from the Insurance Information Institute, the Bureau of Labor Statistics, the National Highway Traffic Safety Administration, and other industry sources and news coverage were compiled to compile factors that may contribute to higher car insurance rates.


Shortages of parts and new vehicles, waves of retiring mechanics, and more dangerous roads are altering the automotive insurance landscape for insurers and you, the driver. Furthermore, the value of new vehicles has skyrocketed since 2020, with the greatest gains in 2021 as Americans returned to offices, restaurants, and social events, driving up demand for both new and used vehicles.


According to Kelley Blue Book, new vehicles have been selling for more than the sticker price for nearly a year and a half. According to the BLS, new cars will cost 18% more in October 2022 than they did in October 2020. During the same time period, used car prices increased by 29%.


In general, any type of insurance is based on complex financial schemes that balance cost and risk while also making a profit and protecting consumers from financial ruin. To help spread risk, most states require drivers to carry a minimum level of automobile insurance.


When an insurer has to pay out more in claims than it receives in premiums, the company may become insolvent and fail. As a result, insurance companies are constantly evaluating and adjusting the amount of money they need to collect in premiums—semiannual or annual charges, often paid in monthly installments—in order to avoid incurring losses.


Of course, insurers determine how much to charge a client based on their assessment of the client's likelihood of triggering reimbursement for damages. And those factors can include the client's education level, occupation, and driving record.


According to the Insurance Information Institute's chief insurance officer, rates will have risen 8.8% in 2022 and will rise another 8.9% in 2023. Companies are expecting losses in the coming year due to difficult economic conditions as well as natural disasters, according to the institute. Since making landfall in August 2021, Hurricane Ida has already bankrupted 11 insurance companies, and the aftermath of Hurricane Ian in 2022 could cause even more damage.


Wages in Auto Repair Shops Are Rising

In 2021, the median pay for auto technicians and repairers surpassed the national median of $22 per hour for all occupations. According to the Bureau of Labor Statistics, they now earn a median hourly wage of $22.55, a 6.4% increase from 2020.


Workers who put your car back together after a collision make more money than veteran trade workers who retire. In recent years, dealerships and lobbying groups have formed alliances with schools and non-profits to train the next generation of auto technicians. As cars become more technologically advanced, their jobs have become more technologically advanced.


The costly dilemma for drivers is expected to continue for the foreseeable future. According to the Bureau of Labor Statistics, the number of auto technicians employed in the United States will remain roughly constant through the end of the decade.


Supply Chain Issues

New vehicles are also in short supply as a result of the production challenges introduced by COVID-19 and varying government mitigation plans around the world. Drivers are keeping their cars longer due to high prices on the ones that are available. The average car on American roads is older than ever before, and it may require more frequent maintenance.


According to a report from collision repair tech firm, car parts are in high demand this year, but manufacturers are still working to catch up. Vehicles are taking longer to repair as a result of the difficulty in finding workers, causing consumers to use rental cars for longer periods of time—another additional expense for insurers. According to the firm, repairs took 2.1 days longer in 2021 than in 2019.


To cover expenses during downtimes, rental car agencies have spent the last several years selling their inventory, which has added to costs. They, too, are having difficulty purchasing new vehicles, driving up prices for the vehicles they do have available.


The number of traffic accidents is increasing.

The number of traffic accidents and fatalities on the road is on the rise. Between 2020 and 2021, the number of people killed in car accidents increased by 10%. According to the National Highway Traffic Safety Administration, urban roads killed more people than rural roads in 2021.


And the increase in deaths and accidents coincides with an increase in medical care costs. The average cost of medical care increased 6.5% between October 2020 and October 2022, according to data from the Bureau of Labor Statistics.


Claims and costs are increasing.

These factors will result in greater losses for insurance companies in 2021 than in any other year in the previous decade. According to the Insurance Information Institute, not only are claim costs rising, but comprehensive damage claims are also becoming more common. This coverage protects a vehicle from damage that is not caused by a collision, such as storms.


In a nutshell, more claims in recent years and a shortage of supplies will contribute to the increase in premiums in the year 2023. Expect anywhere between 10 - 20% increase on your renewal.



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