There are many factors that could be causing policy rates to increase.
Automotive insurance is something that is paid monthly by millions of people across the country. Anyone who owns and operates a vehicle is required to carry auto insurance, and while there are many different carriers to consider for an auto policy, rates don’t vary that dramatically from one to the next. And, in recent times, those rates have been skyrocketing, hitting drivers in the wallet at a time when everything else seems to be getting more expensive, as well.
The question at this point is simple (although the answer is anything but) – why are auto insurance rates going up so dramatically? There are actually a few points to consider when it comes to climbing rates.
As a starting point, extreme weather events are becoming more and more common as a result of climate change, and those events do significant damage to property – including vehicles. The damage that is done during weather events can wind up driving insurance rates higher, and this effect has been seen in home insurance just as is being seen in auto insurance prices. Of course, in the short term, there isn’t anything that can be done about this factor, and only time will tell where it goes in the long run.
When a vehicle is damaged and needs to be repaired under an insurance claim, the insurance company will make that payment to the repair facility. So, if the cost of car repair goes up, so too does the cost of insurance. Those auto repair prices have indeed been rising as a result of things like increasing employment costs, parts expenses, building lease prices, and more. Unless the cost of vehicle repair starts to decline, it’s hard to see the cost of vehicle insurance moving down in any significant way.
At the end of the day, this is what is likely driving the majority of the increases in insurance rates. The biggest insurers in the business – names like Geico, Allstate, and Progressive – have been reporting huge profits that are setting records for the industry. With higher rates have come big gains in profitability, even if some of the associated costs that come with providing auto insurance have gone up somewhat in recent years.
On this point, it’s really only regulation that is going to be able to make a dent. If lawmakers put more limits on how much insurance companies can make, it’s possible that those record profits could be curtailed and the price of policies for individual customers could start to move in the other direction.
Whatever the underlying cause may be causing the rates to skyrocket, and it’s probably a combination of many causes all rolled into one, the reality is that millions of drivers are paying more than ever for auto insurance and it’s putting an additional strain on the economy. With other basics like food and gas also demanding high prices, paychecks don’t go as far as they did just a year or two ago.
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