Repairing & replacing vehicles costs more
The auto industry has seen its share of labor shortages and supply chain disruptions over the past year. The demand for auto technicians outpaces supply by an estimated 5 to 1, leading to higher labor costs. Strained supply chains have also caused prices for auto parts and vehicles to spike dramatically. Altogether, these factors led to a 6.3% increase in the cost of vehicle repairs and maintenance as well as a 41.2% spike in used vehicle prices.
As repair costs go up, the amount insurers pay to fix their customers’ vehicles also goes up. The industry has struggled with a worldwide microchip shortage, and car parts costs have risen. Higher prices for parts push up the cost of repairs for insurance companies. These additional costs are passed to policyholders via rate increases. Likewise, as vehicle values rise, insurers pay more to replace their customers’ totaled cars and trucks, all of which increases the cost of auto insurance.
A shortage of rental cars and longer time in a rental car after a crash due to lengthier repair and replacement times. Repair delays also mean that insurers are paying for rental cars for more extended periods while policyholders wait for their vehicles to be repaired, costs that will eventually result in higher premiums.
Accidents are increasing, leading to more claims
Changes in driving behavior are impacting insurance rates. The number of car accidents has gone up, leading to more insurance claims. This higher claims volume, coupled with higher vehicle repair and replacement costs, is ultimately what’s driving insurance rates up throughout the industry.
You. If you have had a ticket or an accident, it is likely your insurance rates will go up. A change in your credit score can have an impact on your rates. Also, if you have recently moved to a different zip code, that will affect your rates.
