According to Randon Morris, apart from certain factors like location, marital status, age, driving record and gender that normally increase insurance rates. Auto insurance premiums can increase even when you didn’t file any claim because there might be an increased number of claims from other drivers or car owners in your area.
And, another reason for this is simply because auto insurance companies have to reimburse for the annual payment that was made in claims says Randon Morris. This is usually done through rate revisions especially when their claim payout exceeds premium revenue. Those extra costs will be added to customers’ payments the following year. But this is not the reason for higher auto insurance rates in 2022.
The pandemic takes a toll on everyone and with the stay-home order and business closures only a few cars are on the road and fewer people commuting to work. Since most people spend more time at home and less on the road, auto insurance companies have to give out special discounts to some of their policyholders. As businesses and offices begin to open in 2021 and people return to work there was an increased rate of fatality in the spring of the year which resulted in increased auto insurance claims.
In this blog post, Randon Morris is discussing some factors or reasons for higher auto insurance rates in 2022.
Why The Higher Rates?
Different factors can increase auto insurance rates which can be personal, economic and social. Based on these factors the price of auto insurance is being determined.
1. Disrupt Supply Chains
The pandemic disrupted the supply chain, especially during the lockdown. There was less demand for vehicle parts since the majority of people are at home and fewer cars on the road. When this starts to get better and people begin to use their car it results in an increased demand with less supply. Due to the less supply, there was an increase in the price of vehicles parts with an increase in labour and repair cost. One of the major factors that contributed greatly to the disrupted supply chains is the scarcity of chips last year which are used for various vehicle applications. The chips are what is used in the entertainment system of vehicles, driver assistance systems and electronic mechanisms. The shortage supply is part of what causes an increase in the cost of repair and maintenance which in turn affect the insurance rates of vehicles.
2. Inflation Rates
Inflation is affecting every area of our life and that includes the price of all the basic needs. The major factor for the inflation is the pandemic which has contributed to increased cost in almost everything including car insurance. The amount of money we now spend on average has increased more than the pre-pandemic period, says Randon Morris. Even the price of both new and used cars increased greatly toward the end of last year. With the new technology and features that are now included in vehicles, it becomes even more costly to own one and repair it in case of an accident. Unfortunately, inflation doesn’t only affect the price of vehicles but the cost of healthcare services has also increased.
Since auto insurance is not only about repairing the damaged vehicle after an accident but also catering for damaged property and medical expenses. This means your insurer will have to pay more this year, if you or someone gets injured due to a car accident. With inflation comes an increase in the price of auto insurance because insurance companies will have to ensure there are sufficient funds to pay for any claims.
3. Shortage of Labour
During the lockdown, certain people changed their jobs instead of staying home doing nothing and to maintain a steady income flow. The shortage of labour is not a result of employment but rather due to a change of professions or career. When there is a shortage of labour in a given profession as compensation the pay rate is always high. The usage of the car was very less during the lockdown which means those that can repair vehicles will have nothing much to do during those periods. This could have resulted in having fewer people doing mechanic jobs which means insurance companies will have to pay more to repair damaged cars.
Other factors that can also contribute to the hike include the type of vehicle you drive, age, credit score, coverage choice, driving records, location, gender and marital status. For instance, the number of insurance companies in a location, the accident rate, claim rate, crime rate, number of drivers that are not insured and other factors in the location will influence the cost.
If you are looking for better rates and offers you may have to shop around to see insurance companies that are willing to give lower costs. Whatever the case may be, auto insurance is expected to rise this year says, Randon Morris. The supply chain disruptions, costly repair due to new and improved technology in cars and more drivers getting back on the road will all influence the higher rates of auto insurance.