Auto Insurance Costs are increasing

If you have recently gotten a more expensive car insurance bill, you’re not alone. Nationally, auto insurance costs are up about 15% from last year. In fact, car insurance premiums are expected to continue rising. Major insurance companies, like Allstate, Progressive, and State Farm announced prices increases for 2023. This is due to the worst incurred loss ratio for a first quarter in two decades.

What are the factors that are affecting auto insurance premiums?

The Loss Ratio

(Insurance claims paid) + (expenses)

(total earned premiums)

The loss ratio is a calculation that adds the total claims plus cost to administer the claims, divided by the total premium earned for an insurance company.  Simply put, insurance companies need to be profitable, and with a low loss ratio, they are in a better financial position.

The higher costs for new cars, auto repairs, including automotive car parts, and labor costs due to the lack of skilled auto mechanics affect the loss ratio. Another factor is the increased cost for car rentals due to less available vehicles. More drivers are returning to the roadways for leisure and commuting back to the office, increasing the risks of accidents. Many analysts also attribute the higher accident rate to the bad driving habits (speeding, texting while driving) acquired during the pandemic.

Law of Large Numbers

It is also important to understand that you are not the only person your insurance company insures. You are one driver in a large pool of drivers. Insurance is about spreading the costs (car repairs from accidents, medical costs) over a large number of customers. Our Pennsylvania insurance pool is constantly changing and is impacted by the increased costs. Many good drivers are penalized with higher insurance rates have little to do with their driving and lack of accidents.

Social Inflation

Social inflation is how insurers’ claims are increasing above general inflation. This is thought to be due to a trend in increased litigation from people suing and seeking large monetary payouts for their injuries.

Contact Dtown Insurance for your Auto Insurance

Dtown Insurance is here to help, we can compare auto insurance coverages with our carriers and look to save you money on your insurance! Call today!