What’s driving auto insurance premium hikes? | Insurance Business America
Motor & Fleet
What’s driving auto insurance premium hikes?
“It’s probably the worst period for auto insurers it’s been in 30 years at least”
Motor & Fleet
The US auto insurance sector is grappling with what experts are calling its most significant crisis in three decades, with insurers facing challenges that have led to soaring price hikes.
Auto insurance costs increased 16.9% from the previous year, according to the consumer price index (CPI) for June.
Furthermore, a recent study by J.D. Power found that nearly a third of auto insurance customers have encountered a rate increase in the past year alone.
This surge has been attributed to record-high losses for insurers, as they face larger expenses associated with repairing or replacing vehicles.
The return to pre-pandemic driving habits has also led to heightened claims, with accidents, litigation, and medical costs now increasing.
Amid this environment, insurers on average reported losses of 12 cents for every dollar of premium written in 2022, according to J.D. Power.
“It’s probably the worst period for auto insurers it’s been in 30 years at least,” Neil Alldredge, chief executive of industry body National Association of Mutual Insurance Companies, told the Wall Street Journal in June.
Major players like State Farm and Allstate have been compelled to increase premiums in a bid to offset these losses.
State Farm has increased rates by 13.3% in Texas, 8.2% in Pennsylvania, 6.9% in California, and 6.5% in Illinois. It also recently implemented a 17.3% rate hike in Louisiana, as announced by state insurance commissioner Jim Donelon.
Allstate, meanwhile, secured approval for 83 rate increases in various states in the first quarter of this year.
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