While auto insurance rates fluctuate from time to time, you may not realize why. Higher premiums can certainly be frustrating but it’s important to know what insurance carriers base their decisions on.
More recently, inflation has played a role in the increase of auto insurance rates due to a number of factors. One reason is that driving is returning to pre-pandemic levels. When the pandemic began, people were working from home and there were fewer accidents and claims, allowing insurance companies to return an estimated $14 billion in premiums to United States policyholders, according to American Property Casualty Insurance Association.
As driving is returning to normal, the National Highway Traffic Safety Administration estimates 20,175 people died in motor vehicle traffic crashes for the first half of 2022 – an increase of .05% from the 20,070 fatalities the agency projected for the first half of 2021. Experts say that increase is not just a return to the road, but it’s also because more motorists are driving impaired, speeding and not wearing a seatbelt – all factors leading to fatalities, increased claims and, by default, driving up insurance costs.
Although the global supply chain issue is improving, it’s another factor that is impacting auto insurance claims costs. When the pandemic began and countries were locked down, many manufactured goods, including those in the auto industry, were halted – which caused a ripple effect across the world. These disruptions have not only caused repairs to take longer because auto repair shops need to wait for the parts to come in, but auto parts like bumpers, side panels, windshields and semi-conductor chips have skyrocketed due to the increased demand – all leading toward rate hikes.
While inflation has impacted rates, there are also a number of other factors that determine what you pay annually for car insurance like the type of coverage you have, your driving record and where you live, according to the Insurance Information Institute.