Why are personal auto insurance rates continuing to increase

Despite the fact that our personal auto insurance rates increase at each renewal, insurance carriers have not turned an underwriting profit in years. Underwriting profit is the earned premium remaining after losses and administrative overhead have been paid.  2018 was the third consecutive year that the U.S. property and casualty industry reported an underwriting loss.  

Auto insurance rate hikes are the effect of increased losses — a combination of the number of auto claims and the cost to settle them.  Increased losses have been caused by the following:

• Hurricanes and Wildfires
• Costly Repairs
• Distracted-Driving and Tech Overload

Hurricanes and Wildfires

Unfortunately, our country has suffered through a number of natural disasters during the past couple of years.  In 2018, hurricanes Michael and Florence caused between $7.7 billion and $14.5 billion in insurance losses.  These storms pale in comparison to 2017’s Hurricane Harvey.  The storm’s aftermath equated to $19 billion in insurance losses and over a million autos were destroyed — more than in any single event in American history.

As if the winds and the rains weren’t enough, California’s 2018 wildfires caused $123 million in auto and non-residential insurance claims.

Costly Repairs

According to Cars.com, the average auto mechanical repair bill is between $500-$600.  The most common repairs and costs are as follows: timing belt ($400-$900); alternator or starter replacement ($400-$600); and brakes ($500).

Insurify.com outlines some of the most common auto body repairs and costs.  If your door is damaged or dented, it can cost $1,500 or more if you need to replace the door and the lock. Repairing your suspension system costs anywhere from $1,000 to $5,000.  Bumper repairs can cost $2,500—possibly more if sensors or cameras are damaged.  As of May 2018, all new vehicles must have rearview video systems (backup cameras) in accordance with NHTSA regulations.  The cameras have proven to reduce the number of accidents caused by human error, but this certainly increases the cost of what used to be a simple bumper repair.

Distracted Driving & Tech Overload

Speaking of sensors and cameras, take a moment to consider all of the tech features that are offered these days.  Backup sensors, adaptive cruise control, lane departure warnings, rear cross-traffic alerts, 360-degree cameras, automatic emergency braking—remember when people worried that navigation systems were too much of a distraction? Think about all of the central display options that can keep a driver from his or her primary task of safely operating a vehicle.  There are options for music selection, navigation, suggestions for shopping or dining, and adjusting the auto’s handling or performance.

Here are some important statistics on the subject of distracting driving:

• In the United States, about nine people are killed every day due to car crashes involving a distracted driver.
• Once a driver has been distracted, it takes only three seconds for a car crash to occur.
• Texting or reading a text takes a driver’s eyes off the road for at least five seconds.  Close your eyes for five seconds and imagine that you are driving.  Scary, isn’t it?
• Texting and driving is six times more likely to lead to a car accident than driving drunk.

On A Positive Note

It’s not all bad news, though.  The average personal auto insurance premium in Ohio is $1,037 per year—27.3 percent less than the national average.  

Although we cannot control the weather or wildfires, we can do our part to drive safely and stay focused with our eyes on the road—not our devices.

For more information about insurance rates and options, contact your local MMA representative for more information.