Have you noticed your car insurance costs creeping upward over the last few years? You aren’t alone. The U.S. Bureau of Labor Statistics recently revealed that the price of car insurance has risen by over 20 percent since 2022.
According to the agency, just for the month of March, the motor vehicle insurance index rose by 2.6 percent, following a 0.9 percent increase in February. When broken down by month, the difference doesn’t seem so bad, but Yahoo Finance reported that the auto insurance annual increase of 22.2 percent is one of the biggest increases since December 1976 when prices increased by 22.4 percent. The report also stated that more auto insurance cost increases are likely to occur in the near future.
“While the magnitude of rate increases is likely to ease somewhat, after several years of double-digit increases, some lingering claim cost inflation and adverse claim severity and frequency will likely lead to a ‘higher for longer’ auto rate environment,” CFRA analyst Cathy Seifert told Yahoo Finance.
Auto insurance isn’t the only rising costs for drivers. Auto repair costs increased by 1.7 percent, up 8.2 percent in a year, while gasoline costs saw a 1.7 percent increase in March with an annual increase of 1.3 percent.
During a testimony to the Senate Banking, Housing and Urban Affairs Committee on March 7, Federal Reserve Chair Jerome Powell brought up the rising cost of insurance:
“It is clear that insurance of various different kinds, housing insurance but also automobile insurance and things like that, that’s been a significant source of inflation over the last few years, and it’s to do with a million different factors,” he said. The main two causes pointed to included climate change and the rising cost of car parts.
A report by Reuters echoes that claim by stating the varying causes for car insurance cost increases include the, “rising costs associated with repairing increasingly complicated vehicles and more storm damage amid climate change.”
Supply chain issues and more vehicles being totaled as a result of storm damages are also contributing factors, and let’s not forget the shortage of mechanics, which is increasing labor costs and causing jobs to take longer to complete. Longer repair times leads to insurance companies paying more to put customers in rental cars. As a result of insurers raising premiums, collision repair shops have also noticed an increase in out-of-pocket expenses for their customers due to short or delayed payments.
In collective reports, insurers claim that pandemic losses from part delays, rising labor costs, and used car values are the main causes for rising auto insurance rates.
The rate hikes continually receive criticism from consumer advocacy groups who’ve claimed insurers are overstating needs and overburdening the consumer.
Open Secrets, a nonprofit organization based in Washington, D.C. that tracks and publishes data on campaign finance and lobbying, found that since 2020, insurers have ranked 3rd in lobbying. The insurance industry as a whole, which includes the health, property, and auto insurance companies, has reportedly spent $3.6 billion in lobbying since 1998, making the industry the top second spender between 1998 and 2023. The insurance industry was only beat by the pharmaceutical and health products sector which spent $5.9 billion during the same timeframe.
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