Find out why insurance premiums are rising

Find out why insurance premiums are rising
Find out why insurance premiums are rising

«The cumulative years of record high inflation have greatly increased the cost of auto repair and replacement,» said Robert Passmore, vice president of the personal lines division at the Accident Insurance Association of America. «Over the past five years, the cost of auto parts and used cars and trucks has increased by nearly 40 percent. Car repair costs have increased by more than 20 percent,” he said.

Buying a new car?

In today’s inflationary environment—whether it’s rising or cooling a bit—the cost of buying a vehicle is increasing. According to AAA’s Your Cost to Drive report, the average MSRP in 2022 for a new vehicle was $33,301. And the newer the vehicle, the more it costs to insure.

Newer vehicles have advanced, sophisticated technology systems. Vehicles with advanced technology, such as cameras and sensors, require more replacement parts, higher labor costs, and additional operations to scan and calibrate the systems. «This means that repair costs have risen to their biggest increase since the previous year,» Passmore added. «These more complex and expensive repairs also take longer and that translates into higher rental vehicle costs.»

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Passmore noted that the increased costs of repairing and replacing cars should extend into 2024 and beyond. He said insurers encourage drivers to reduce their risk by avoiding distracted driving, speeding and impaired driving, which can lead to a car crash.

«Insurers are advocating for better infrastructure, including reliable supply chains for critical auto parts and safer roads, which should lead to fewer crashes, controlled claims costs and affordable insurance premiums,» he added.

Theft and fraud

For the first time in history, more than 1 million cars were stolen in the United States in 2022, according to the Insurance Information Institute; and the National Insurance Crime Bureau reports that in the first half of 2023, nearly half a million vehicles nationwide were stolen. One of the biggest reasons for the increase in car theft is because of catalytic converters: the metals used in the catalytic converter are extremely valuable, in high demand and can be resold by thieves.

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