First car prices started to increase, then inflation started pushing up the price of food and basic essentials. Now, it seems like auto insurance quotes and home insurance rates are poised to skyrocket as well. Today, we’re going to take a look at what’s driving these increases and how experts believe these increases will play out over the near future.
The prices of almost everything seem to be going up, and this is due, in large part, to inflation. For those of you who need a quick refresher on what that is, inflation is broadly defined as a decrease in the purchasing power of money, which manifests as an increase in the price of goods and services in the economy. This can be caused by lax monetary policies, the supply of money growing too large relative to the size of the economy, pressures on supply or demand, etc. Long story short, though, as inflation rises, so too does the cost of living.
How has that been affecting auto insurance rates? In the United States, rates have risen an average of nearly five percent, according to S&P Global Market Intelligence, who looked at data for some 63 million auto policy holders across the nation. Depending on where you live, you may have seen specific changes that were more severe or less severe.
In Massachusetts, for example, there was actually an average decrease of rates of less than a percent. Meanwhile, in Minnesota, drivers experienced a whopping average rate increase of fourteen percent. According to some experts, these high-end increases are even greater than those experienced across the medical and healthcare sectors.
What’s driving these increases? We’ve already touched on a big one—inflation. Recently, the annual inflation rate jumped to just over nine percent—the highest it’s been since November of 1981. While vehicle and auto insurance-related costs weren’t the highest (as energy and other such commodities saw the most significant increases) inflation still hit them hard. The problem has been compounded by two recent trends: supply chain disruptions and labor shortages.
Both are part of the cascading effects of the COVID-19 pandemic, which caused disruptions across industries. Without the critical components—like semiconductors—the price of vehicles started to creep upwards. Similarly, a lack of skilled workers has driven up the costs of vehicle assembly, vehicle repair work, et cetera. Now, as the price of vehicles goes up, and the price to repair them along with it, so too does insurance, as it needs to be able to cover these costs in the event of a collision. With the costs of medical care going up as well, it’s little wonder why auto insurance rates have also had to climb in order to compensate.
Will things stay this way? It is possible that, as inflation drops in the future, auto insurance rates will also fall in sync. Remember, though, that auto insurance prices are also based on personal rating factors—some of which you can control—so there’s still a chance that you can find reasonable rates, even though the current trend is one of increased costs.