The auto insurance industry in the U.S. is in trouble. Insurance companies are complaining about the rising costs of doing business. Because of this, as The Washington Post reports, drivers across the country are facing increasing premiums.
Insurance companies don’t seem to want to be in the business of, you know, actually offering insurance, at least not in an era where massive natural disasters are becoming more frequent and cars are getting more complex. The Post spoke with insurance industry executives and regulators who blamed rising costs on cars that are becoming more and more expensive to diagnose and fix and increasing disaster related claims.
Car repair costs, body shop wages, and used car prices have all had significant increases,” said Frank Palmer, chief insurance officer at Root Insurance. “The entire industry has had to raise rates to keep up with these trends.”
“It’s more expensive to diagnose newer vehicles,” said David Woodall, a mechanic at Metro Motor in D.C. “The parts aren’t a whole lot more expensive, but the frequency of repair on them is more than it used to be. If an air bag goes off, that’s thousands of dollars — a new car might have eight air bags in it.”
Combine that with how tough the last few years of doing business has been, and insurance companies are passing those costs onto their customers. Data from Bureau of Labor Statistics shows car insurance was 16 percent more expensive in July than it was at the same time in 2022; that number is also 70 percent more expensive over the last decade. Natural disasters haven’t helped matters.
In Colorado, car insurance premiums have increased 52 percent since last July as blizzards, tornadoes and hailstorms have led to an increased number of claims. And in Florida, premiums have soared 88 percent as insurers scramble to make up losses from hurricane-linked damage claims.
Drivers all over the country are getting squeezed. State Farm hit one Louisiana driver with a 30 percent increase on her coverage, raising her premium to just over $1,800; a Florida driver of a VW Jetta saw his insurance go up $85 per month. And in some places the numbers don’t make much sense, as insurance adjusts their costs for “risk” as one State Farm spokesperson put it.
Louisiana, for instance, actually saw a six percent rate decrease in 2022, but it has the second highest average insurance premium in the country ($2,546) after Florida. State officials are trying to control insurance costs, but their hands are tied as they can’t do much to regulate; do something the insurance companies don’t like, and they’ll stop offering coverage to drivers like they’ve done in California, and the Southeast. Head over to The Post to check out the rest on this brewing crisis.