Costs associated with automobile ownership, such as repairs and medical care after accidents, have risen in recent years owing to inflation. Due to the 12.7% annual increase in car maintenance and repair bills, insurance are passing these increased costs on to their clients. The latest inflation statistics from the Consumer Price Index (CPI) report indicate that motor vehicle insurance has surged by 19.2% year-over-year as of November, burdening family budgets preparing for the holiday season. This increase in auto insurance rates is only one component of a more significant trend.
During the COVID-19 epidemic, many variables contributed to a rise in insurance premiums, including changes in driving habits, more claims, and higher car pricing. In addition to natural disasters like Hurricane Ian in 2022, which drove up prices, car insurance companies lost 12 cents for every dollar they collected in premiums. While Americans spent an average of $2,008 (or $167/month) on full-coverage insurance this year, the cost of minimal liability insurance was far lower, at $627/year (or $52/month). Annual insurance premiums range from $1,199 in Vermont to $3,643 in Michigan.
S&P Global analyst Tim Zawacki predicts that rising insurance premiums may persist until 2024, even though few businesses see a return on investment. The average combined ratio for vehicle insurance in the sector was 122.2% last year; this year, it’s predicted to be about 10.12%. The ratio compares underwriting claims and expenditures to earned premiums. The increasing severity of claims, surpassing premium increases, is the leading cause of the issue. Insurance companies still have a long way to go before their prices reflect the rising cost of losses, even after many increases.
The national average for auto insurance premiums is up 19% from a year ago, with Florida having the highest premiums of any state in the US. This follows insurance payouts from Hurricane Ian, which hit Southwest Florida last year and were almost record-high.