As we look ahead to 2023, many of us are very reasonably concerned about rising costs of day-to-day living. Inflation, supply chain issues, and an uptick in car accidents are sure to take their toll on our pocketbooks and will no doubt lead to higher car insurance costs next year.
The number of car accidents dropped drastically during the pandemic but now, with an increased number of drivers on the road, the number of accidents has increased as well. More money is also being spent on car insurance claims, due to expensive parts, medical bills and costs of labor.
Because we know that the cost of car insurance will continue to rise in 2023, we wanted to inform you of the factors governing this, and warn you “how the chips could fall”.
Inflation’s Rampant Effects on Rising Costs:
The Consumer Price Index saw an increase of 7.7% for the 12-month period that ended in October of 2022. Unfortunately, this much-used benchmark for fiscal health saw its largest annual jump in 40 years, with costs of housing, energy, food, and car insurance rising and creating general discontent. Year-over-year, car insurance prices are up by 12.9%, and in the last two years, costs have risen an astonishing 19.9%.
The American property casualty insurance association produced a new report over the year that took a close look at car insurance companies’ daily struggle with these rising costs. They found that the cost of claims is rising even faster than the CPI, which will force car insurance companies to impose rate increases in order to keep up. This is of grave concern to consumers, who already felt the strain of increased costs.
Medical Claims Reach the Red Zone After Dangerous Collisions:
Since people are back to enjoying their freedom and driving more than ever, serious car crashes have occurred with greater frequency. Data from the Federal Highway Administration shows 43.2 billion miles were traveled by vehicles in the first half of 2022, which was a 2.8% increase when compared to the same period just one year ago. Any driver with increased mileage will also see their opportunities for an accident increased. Just in the past year there has been a 7% increase in fatalities on America’s roads.
The frequency of injury claims themselves has decreased by nearly 25% in recent years, but the severity of each incident has risen by nearly 40%. Many drivers speed or are reckless on the road (and maybe enjoy their recovered freedom a little too much), making the insurance payouts higher. The average cost per collision has now reached over $5,000 in the first quarter of 2022, a quite astounding 36.5% higher than the first quarter was a mere two years ago.
Costs for Repair Hastily Heightening:
Once a serious accident occurs, repairs need to be made, and inflation has hit this area quite intensely as well. Parts and labor costs have been directly impacted by the events of the last two years. Not to mention, aftermarket parts can be a challenge to procure to complete the repair. Rental cars now must be used for longer periods, situated at 4.5 days higher than last year’s total of 18.2 days. Since repair times have gotten longer, the pressure is on for entities to raise rates.
Other factors, such as the rising costs of used vehicles, the increased instances of catalytic converter thefts, or even overinflated claim payouts due to litigation have impacted premiums as well. Unfortunately, high litigation court and verdict payouts are passed down to you, the consumer.
We know that change has already been taking place for quite some time, and it can feel like there isn’t an escape from the rising costs of living. At the Alexander Insurance Agency in St. Charles, our experts will help you assess the best policy to suit all of your needs AND your budget. We want to keep costs down for you and your loved ones during such challenging and turbulent times. Contact us to set up a meeting today!