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Four Trends Impacting the Auto Insurance Market

More Americans are driving now than ever before. Why is this and how does it the auto insurance market? This article discusses four key car insurance trends impacting the auto insurance industry.

Trend #1: Inflation

Following intensive federal government spending during the pandemic, inflation pressures have affected most Americans looking to get back to normal. In addition, the ongoing war in Ukraine has alienated a portion of the U.S. energy supply, adding on to already rising fuel costs.

According to the U.S. Bureau of Labor Statistics, in February the Consumer Price Index increased 7.9% over the past 12 months. Concerning autos, the following items showed a considerable 12-month increase:

  • Gasoline: 38%
  • Energy: 25.6%
  • Used cars and trucks: 41.2%
  • New vehicles: 12.4%

Rising fuel and energy costs have subsequently increased the cost of raw materials. For example, steel rebar futures have increased more than 34% since the beginning of the pandemic. “Parts inflation” has affected the availability and price of important automobile parts such as bumper covers and steel sheet metal products.

Inflation has had a significant effect on auto insurance rate increases. Due to the lack of drivers on the road during the pandemic, rates remained more or less the same. However, now that most Americans want to get back on the road, rate increases will begin affecting drivers in most states throughout the country in 2022.

Trend #2: More Miles Travelled

One of the most significant car insurance trends affecting the current market is the sharp increase in vehicle miles travelled in the first couple months of 2022. As Americans spend more time on the road for trips and festivities, premiums have begun to reflect this shift.

According to the U.S. Energy Information Administration, vehicle miles travelled in 2021 reflected pre-pandemic levels of 8936 million miles/day in 2019. Compared to 7933 million miles/day travelled in 2020, vehicle miles travelled rebounded to 8846 million miles/day in 2021 with 9092 million miles/day expected in 2022.

Trend #3: Increasing Auto Insurance Claim Volume

Despite rising fuel and oil costs, claims volume has largely returned to pre-pandemic levels because of rising vehicle miles travelled. Return to office for major corporations in the United States will likely prompt a further increase as Americans spend more time commuting to and from work.

A sharp increase in vehicle miles travelled has also led to more dangerous driving accidents among American drivers. More impaired driving actions have led to higher occurrences of serious injury, fatalities and accidents. According to the National Highway Traffic Safety Administration, fatalities from motor vehicle accidents increased 12% between the first 9 months of 2020 and 2021, the highest rate since 2006.

A sharp increase in both theft of autos and auto parts have contributed to increased claim volume. According to Insurance Business Magazine, the National Insurance Crime Bureau reported a 29% increase in auto thefts since 2017, the highest rate in over a decade. A decrease in police department funding is supposedly a factor in both increasing auto thefts and serious motor vehicle accidents.

Trend #4: Population Migration

The pandemic introduced a significant redistribution of Americans throughout the country. As remote work has become more widely available, many Americans have moved themselves to more affordable places outside of where they work. This “urban exodus” has changed how both insurers and repair shops market their products to consumers.

Greater dispersion of residents in an area have prompted insurers to consider virtual claims handling processes. This method of claims handling is becoming more popular among insurers and saves them time and overhead costs.

In addition, collision repair shops are considering the costs brought about by new vehicle technology. Collision-avoidance technology utilising lasers, cameras and radar have become more common among new vehicle models across all price points. This shift may decrease costs from motor vehicle accidents, but it increases the costs of labor and parts for collision repair shops.

The One Constant

The auto insurance market is rapidly evolving. While trends come and go, one thing remains constant – the need to deliver an amazing auto insurance claims experience. That’s exactly what VCA Software enables. Download our white paper or request a demo to learn more.

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