Drivers Should Brace for Higher Car-Insurance Rates
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What is the main topic discussed in this episode?
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Here's your money briefing for Tuesday, May 31st.
What evidence suggests auto-insurance rates are rising now?
I'm J.R. Whelan for The Wall Street Journal. Seems like every month the pinch your household finances feel from higher prices gets more and more painful. Well, you can add one more item to that list, your car insurance.
There seems to be more distracted driving than pre-pandemic, and so a lot of wrecks are happening at very high speeds. So there are all kinds of costs coming at the insurance companies, and they want to pass those on to consumers.
So when should you expect to see your car insurance rates go up? Our reporter Leslie Sism has been following this issue. We'll go through the numbers with her after the break.
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Why are insurers citing more wrecks and distracted driving as a cause?
They want your identity. They want your innovation. ReliaQuest fortifies your business with agentic defense, AI that detects, contains, and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. ReliaQuest, agentic defense for the enterprise. Learn more at ReliaQuest.com. That's R-E-L-I-A-Q-U-E-S-T.com.
Some auto insurance companies are poised to raise rates by as much as 20%. So how are the insurance companies justifying those increases? Leslie Sism covers the insurance industry for us, and she's here with more details. Hey, Leslie, thanks so much for being with us.
How has the pandemic-era traffic shift affected claims and fatalities?
Oh, thank you. My pleasure.
So you know, Leslie, it wasn't that long ago you were with us talking about car insurance companies issuing refunds to drivers. What's changed since then?
The highways have gotten a lot more crowded than they were back in 2020 when the insurers were issuing those refunds. Traffic volume had dropped so dramatically as the pandemic was beginning its spread. As the miles driven plummeted, so did wrecks. As people return to the highways and traffic volumes have returned to pre-pandemic levels in most parts of the country, wrecks are occurring again, especially a lot of serious wrecks. There seems to be more distracted driving than pre-pandemic, and so a lot of wrecks are happening at very high speeds. The fatality rate for motorists has surged. U.S. traffic fatalities reached a 16-year high in 2021. Nearly 43,000 people died in motor vehicle accidents last year.
That was an 11% increase over the prior year, and it was the highest number of traffic fatalities since 2005. That is according to the National Highway Traffic Safety Administration.
Okay, so that's contributing to higher insurance rates, but 20% seems like a steep increase. Is that all that's going on here?
How is inflation increasing repair, parts, labor and rental car costs?
So we have more wrecks that's returning to pre-pandemic levels, but we also have an extremely important new factor thrown into the mix, which is inflation. So insurers are just being hit on multiple fronts by inflation as they're repairing cars. And so they are seeking rate increases because they say, hey, we've got now wreck volume picking up. And when those wrecked vehicles are coming into the repair shops, it's costing a lot more to repair them because of higher parts prices. The labor to repair those vehicles is rising. There are labor shortages. There are higher rental costs when a person gets a rental car as part of the policy during the duration of the repair. So there are all kinds of costs coming at the insurance companies, and they want to pass those on to consumers.
The increases are all over the map.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–0:38
2
What evidence suggests auto-insurance rates are rising now?
0:38–1:19
3
Why are insurers citing more wrecks and distracted driving as a cause?
1:19–2:04
4
How has the pandemic-era traffic shift affected claims and fatalities?
2:04–3:33
5
How is inflation increasing repair, parts, labor and rental car costs?
3:33–5:18
6
What magnitude of rate hikes are insurers requesting and reporting?
5:18–7:44
7
How are state regulators responding to insurance rate-increase requests?
7:44–8:17
8
When will consumers actually see higher premiums on their renewals?
8:17–8:25
Speakers
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