Car insurance rates are rising, but insurance companies could still be under pressure from rising costs in the future
Despite the recent increase in auto insurance rates, the market is still weak, according to Elyse Greenspan, general manager of Wells Fargo.
“The sequential increase has been very modest,” Greenspan said in an interview. “The reason there has been a big year-over-year increase is that the premium base in May 2020 has been affected by all refunds.”
As the number of consumers driving declined, auto insurers refunded $ 14 billion in premiums last year, according to the Insurance Information Institute. Rates stagnated or even fell in the first quarter period.
Recently, the latest Consumer Price Index data showed that the auto insurance index rose by 16.9% in May, after rising 6.4% in April. And this is the first increase since March 2020.
Auto insurers face a number of challenges as the economy reopens. Workers are returning to offices, and vaccines are driving many people to take summer vacations. Government data for March, the most recent statistics available, shows a 19% increase.
The result of people returning to pre-Covid driving levels means the rate of car accidents will increase, according to Michel Leonard, vice president III.
If this year’s trend follows last year’s trend, accidents can also be more serious. Although the number of driving hours fell 13% last year, fatalities increased 7%, according to the National Highway Transportation Safety Administration. Experts attribute this increase to a higher incidence of speeding, drunk driving, and distracted driving.
Additionally, Leonard said, many drivers have no practice, especially when parking or navigating traffic.
More accidents mean more claims, and those claims are expected to cost insurers more as repair costs go up.
CPI data showed month-over-month gains for auto repairs. The 2.8% increase in May was slightly lower than in previous months. (Repair costs rose 3.5% in April and March, 3.1% in February, and 3.5% in January.) And wait times are also longer due to chip shortages. Supply chain disruptions and labor shortages.
However, not all insurers increase their rates. In a Wells Fargo analysis, Greenspan said Hartford and Allstate increased their rates in May, but Travelers, Progressive, and State Farm saw their rates drop. Geico raised rates in April but did not change May rates, he said.
“It’s always a good environment for consumers shopping for auto insurance,” said Greenspan.
She predicts the environment will continue to be challenging for auto insurers through the fall as commuters return to work, students return to school, and people who used public transportation before the pandemic choose to drive themselves.
“There are a lot of headwinds in terms of gravity and frequency,” he said.
Car insurance rates are rising, but insurance companies could still be under pressure from rising costs in the future by ITI190 - Insurance Top Info 190.