High inflation and car prices are driving up insurance rates for drivers to more normal, pre-pandemic levels, experts say.
According to insurance and consulting experts, the auto insurance industry had an underwriting profit in 2020 for the first time in a decade.
This profit was a result of the pandemic, when most drivers were staying off the roads due to stay-at-home orders, layoffs, and remote work.
Auto insurers usually increase rates by 3 percent each year, experts say, but according to S&P Global Market Intelligence and Insurify, they rose 12 percent in 2021.
Insurify is predicting that they will rise another 5 percent this year.
Experts say there are multiple reasons for this increase, including high demand for new and used cars, supply chain issues, rising inflation, and expected interest rate increases.
The computer chips, parts, and labor required for new cars are all still in short supply, experts say, leading to increased costs for both the parts and the cars.
While auto insurers correctly anticipated much fewer accidents during pandemic lockdowns, during the third quarter of 2021, collision frequency, severity, fatality, and replacement part costs all rose significantly.
According to the Insurance Information Institute, collision frequency was up 42 percent and severity was up 43 percent in the third quarter of 2021.
Fatalities also were up 26 percent, and replacement parts costs were up 13 percent.
These increases also have contributed to the quick rise back to around pre-pandemic levels and higher.
Experts say that while these increases may seem steep to drivers, they are more of a return to normal.
However, some researchers say there appears to be some reckless driving habits adopted during the pandemic, including more instances of driving under the influence and road rage incidents.
Experts advise that drivers hunting for the best rates should be sure to shop around, and ask for quotes from both big-name insurers and local insurers.
Drivers also should ask about possible discounts, including bundling options, multiple cars, payment options, and clean driving records.
Depending on a driver’s state, experts say credit score can be an important factor in determining the best rate as well.
Insurers may find that educating drivers on the reasons for the rate rises and offering safe driving discounts can be helpful to aid with reasonable profits and appropriately priced coverage, experts say.Even before the pandemic, rates changed often enough to warrant frequent customer comparison shopping to find the best possible rates.