Inflated auto premiums burn hottest year-over-year
The rate of inflation in auto insurance is especially striking when compared to the overall inflation rate, economist says.
The 20.3% surge in motor vehicle insurance since 2023 is the highest inflation increase for any major industry category over that time, according to Joey Von Nessen, a research economist at the University of South Carolina’s Darla Moore School of Business.
Other major categories from the Consumer Price Index include food and beverages, housing, and medical care.
“The rate of inflation in auto insurance is especially striking when compared to the overall inflation rate, which is currently at just 3.3%,” Von Nessen said in an interview with PropertyCasualty360.com.
“One key reason for the increase is the significant rise in automobile prices,” he continued. “Since January 2020 the average price of a vehicle in the U.S. has increased roughly 25.4%, due in part to the global computer chip shortage following the pandemic.”
Data compiled by SambaSafety, a risk management software company, shows the cost of auto insurance up 45.8% since December 2021, with the industry now focusing on strategic risk control measures to proactively manage rising costs for both commercial fleets and commercial auto insurers.
“Several factors contribute to the inflationary pressure”, SambaSafety Senior Director of Product Marketing Ashley Newbill told PropertyCasualty360.com.
“Since 2020 claims severity is up 36% as advanced safety sensors lead to longer cycle times and higher repair costs for insurance carriers,” she said. “Meanwhile, over 70% of brokers surveyed by SambaSafety said distracted driving was the most significant threat to commercial auto profitability at an estimated impact of over $395 billion per year on the economy.”
According to SambaSafety, an estimated 8% of fatal crashes involved a distracted driver in 2022, while Newbill said maneuver violations like texting or phone use increase with age and make up 30.3% of violations in drivers aged 56 to 65.
“We’re also seeing a shift in how goods are delivered, including a higher proportion of fatalities attributed to light trucks and speed-related violations,” she said.
SambaSafety’s 2024 driver risk report showed gig workers jumped 170% between 2019 and 2021, increasing the number of private passenger vehicles being used for business on the roads while creating new patterns of exposure.
The sector now makes up 36% of the overall U.S. workforce, Newbill said.
Despite the rising to costs insure an automobile, Von Nessen said motor vehicle insurance comprises only 3% of the CPI’s basket of goods, compared to about 36% for housing.
“In the most recent inflation report housing and shelter costs went up 5.4%, and it is this increase driving overall inflation and why the rate remains above the Federal Reserve’s 2% target,” he finished.
See also: