AM Best’s latest Market Segment Report gives a grim outlook for the auto insurance industry, for both insurers and consumers alike. The auto insurance industry is hurting, with premiums and claims continuously on the rise, according to the study.
For insurers, the hike in auto insurance claims is largely due to drivers returning to the workforce. There’s an increasing number of people on the road compared to the height of COVID-19. The more drivers on the road, the more accidents that get reported, and the higher premiums tend to rise.
"Workplace patterns have changed post-pandemic with work-from-home arrangements, reducing the number of vehicles on the road. However, driver inattentiveness and riskier driving habits have become more problematic in the last few years, and as a result, auto severity has worsened," said Christopher Graham, senior industry analyst, in a press release.
Inflation is another point of blame for rising premiums, along with supply chain issues, the AM Best study cites. All these issues combined has resulted in a substantial loss for insurers, which gets passed on to consumers.
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Auto insurance premiums are up across the board, even for those with good credit or good driving records. Car insurance costs have risen 43% in the last three years, according to a recent Jerry study.
Not only have rates risen substantially, but they’re going up at an unprecedented rate. In October, auto insurance rates rose at an annual rate of 19.2%, according to the Jerry study. This was the fastest increase since 1985 when insurance data started being reported.
This cost puts a serious burden on Americans across the entire country. A recent survey conducted found that over 51% of respondents have had to cut spending elsewhere to afford the increase in insurance rates. And 45% of respondents have also stopped saving as much money because they pay more for auto insurance.
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More drivers on the road isn’t the only driving factor in the changes happening in the auto insurance space. Another large cause of premium hikes is climate change, according to a 2020 AM Best study.
Climate change has led to more frequent and more dangerous natural disasters, causing some insurance companies to pull certain insurance products from at-risk states like Texas and Florida.
The effects of climate change also cause a higher number of claims each year, resulting in major losses for insurance companies. AM Best’s 2023 study points to weather-related events as a contributing factor to the more than $90 billion loss the industry recently saw. Hurricane Ian alone was responsible for $50 to $65 billion in losses.
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When auto insurance rates are high, it may seem like you have no control over how much you pay, but there are things within your power that help lower your rates.
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