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July 1, 2024

Driving Forces

Understanding the factors behind auto insurance market trends

Summary

  • Auto insurance costs are rising for everyone, especially successful individuals
  • Advancing technologies and high demand paired with low supply for high-end, luxury parts are a contributing factor to the rise in cost
  • It's beneficial to work with a trusted personal risk advisor

Auto insurance protects you and your assets from the financial risks associated with owning and operating a vehicle. Many people may not realize that not all auto insurance policies are the same, so choosing the right coverage for your needs is important. By having the right auto insurance coverage, you can have peace of mind knowing that you're protected in case of accidents or incidents involving your vehicle.

Impact of advancing car technologies on auto insurance

High net worth, ultra high net worth, and affluent individuals are concerned about their auto insurance coverage due to advancing car technologies, including access to high-end luxury automotive parts, and overall rising costs. While advancing car technologies have improved safety and convenience, the flip side is that same technology leads to increased repair costs. Additionally, complex systems typically require specialized knowledge and equipment for repairs, not to mention that the parts used in these technologies are often more costly.

The semiconductor chip shortage has affected vehicle supply and costs. While the situation is improving, some challenges remain. The shortage forced manufacturers to close production lines or remove features from vehicles. Although the supply is expected to improve, some chip shortages may continue. Despite this, global car production is projected to increase. The industry is adapting to the new normal, and it may take longer to get your vehicle repaired. These factors mean many individuals may face higher repair bills and expenses associated with their auto coverage. These concerns highlight the need for private clients to reassess their coverage and seek guidance to ensure they're adequately protected.

Factors contributing to the rise in auto insurance costs

Auto insurance costs have increased due to factors like risky driving behaviors, the regulatory environment, a surge in nuclear verdicts, higher repair costs, and inflationary pressures, which has led to higher claim payouts resulting in increased insurance premiums. Speeding and distracted driving have led to more accidents and severe damages. According to the consumer price index for June 2023, auto insurance cost increased 16.9% from the previous year. J.D. Power also reported in June 2023 that nearly one-third (31%) of U.S. auto insurance customers say they experienced a rate increase during the past year as the industry raised rates an average of 15.1%.  Insurance companies must adjust premiums to account for the higher risk and potential losses. It's well known that speeding increases the likelihood and severity of accidents,* while distracted driving compromises reaction times. These behaviors have prompted insurance companies to adjust their rates. Safe driving practices and awareness are crucial to address this issue. You also should consider the increase in medical expenses and legal fees, and how they can impact auto insurance costs.

Concerns about uninsured or underinsured motorists

Approximately 14% of motorists are uninsured.** Private clients have concerns about accidents with uninsured or underinsured motorists. These drivers may not have insurance or sufficient coverage to compensate for damages and injuries. In such cases, the injured party may have limited options for recovering their losses. Having uninsured motorist coverage is important to protect against potential expenses. Some states have implemented online auto insurance verification systems to address this issue. Uninsured/underinsured motorist coverage is crucial to protect against potential financial losses. It provides compensation for damages caused by uninsured or underinsured drivers. Without this coverage, individuals may be responsible for covering their own expenses. Having this coverage ensures financial protection and peace of mind.

Types of auto insurance coverage and their purposes

Auto insurance coverage includes liability, collision, comprehensive, personal injury protection, and uninsured/underinsured motorist coverage. Liability coverage protects against bodily injury or property damage to others. Collision coverage covers vehicle repairs or replacement. Comprehensive coverage protects against non-collision damages. Personal injury protection covers medical expenses and lost wages.

Uninsured/underinsured motorist coverage protects against accidents with drivers
who lack insurance or have insufficient coverage. Policy limits and deductibles are important considerations.

Accessing beneficial auto insurance features for added protection

Accessing beneficial auto insurance features like agreed value, original replacement parts, full-glass coverage, roadside assistance, lease gap coverage, transportation expenses, and uninsured/underinsured motorist coverage provides added protection. Agreed value coverage ensures fair compensation for high-value vehicles. Original replacement parts coverage maintains the vehicle's value. Full-glass coverage protects against unexpected expenses such as the need to replace the full windshield or window versus fixing a chip and crack. Roadside assistance provides help in emergencies. Lease gap coverage bridges the gap between the vehicle's value and lease balance. Transportation expenses coverage covers alternative transportation. Uninsured/underinsured motorists coverage protects against accidents with uninsured or underinsured drivers.

Benefits of working with a Personal Risk Advisor

Working with a personal risk advisor offers specialized knowledge, personalized advice, time savings, cost optimization, and ongoing support. Our Private Client Benchmarking Study found that nearly 70% of high net worth and affluent individuals are overpaying to be underinsured.*** In fact, we found that individuals not working with an insurance broker were twice as likely to self-insure or underinsure their risks. A broker:

  • Can assess and manage risks across various aspects of your life.
  • Act as your advocate and trusted advisor, working in your best interests.
  • Handle administrative tasks.
  • Access a network of professionals and provide ongoing support and guidance.

Annually reviewing your auto insurance is essential to help indentify financial risks. A Marsh McLennan Agency personal risk advisor can conduct a complimentary, four-step personal insurance review to ensure your coverage meets your needs. 

Schedule an insurance review with an MMA PCS Personal Risk Advisor to ensure you have the proper insurance protection.

Request Review 
*Insurance Institute for Highway Safety (IIHS), New crash tests show modest speed increases can have deadly consequences, Jan 28, 2021, and United States Department of Transportation, National Highway Transportation Safety Administration, Speeding and Speed Management: Understanding the Problem
**Insurance Information Institute, Facts + Statistics: Uninsured motorists, 2022
***Marsh McLennan Agency, Private Client Insurance Benchmarking Study, 2023

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