2022 Outlook for Auto Insurance Buyers – Forbes Advisor


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Auto insurance rates are expected to rise in 2022, in part due to risky driving and costly claims. This, along with the fallout from inflation and supply chain disruptions, means that price comparison for a good rate is more important than ever.

The good news is that the cost of car insurance for electric vehicles is about to come down, and industry watchers say usage-based insurance can save good drivers money.

Here’s more information on the trends car insurance shoppers can expect to see in 2022.

Dangerous driving contributes to rising auto insurance rates

An increase in speed since the pandemic, a record number of fatal accidents and rising claims costs are likely to drive overall auto insurance rates higher in 2022.

Arity, a mobility data analytics company owned by Allstate, found that time spent at speeds over 80 mph while commuting is about 10% higher than pre-pandemic levels. Arity’s data also shows that nearly one in 20 miles driven is done at speeds over 80 mph.

This lead foot mentality is likely a factor in the spike in road deaths over the past year. The National Highway Traffic Safety Administration (NHTSA) found an 18.4% increase in fatal crashes in the first six months of 2021 compared to the same period in 2020. This is the highest percentage increase high ever recorded by NHTSA.

High-speed car accidents are far more catastrophic, resulting in larger insurance claim payouts. And claims usually lead to higher rates for drivers, as car insurance companies pass their increased costs on to customers in the form of higher rates, even customers who have made no claims.

Related: How much do insurance premiums increase after an accident?

Arity notes that “many drivers will pay more in 2022 as insurance companies begin to raise rates to cover increases in claims costs over 20 years, partly due to increased mileage driven and due to ‘riskier driving since the pandemic increases the severity of accidents.’

Inflation adds to rate hikes

Inflation can also drive up car insurance rates. Richard Attanasio, senior director at AM Best, observes that “inflation trends and supply chain constraints could continue to put pressure on rates, so insurance premiums rise.”

The average cost of auto parts – for items ranging from airbags to bumpers – rose 6% in 2021, the biggest increase since 1997, according to research by CCC Intelligent Solutions.

Drivers looking for relief from the effect of inflation on car insurance may be more likely to shop around and get a low rate. Policies last six to 12 months, so if any auto insurance rate increases occur during that time, your rate is already locked in until the end of your policy term.

Doug Heller, insurance expert for the Consumer Federation of America (CFA), recommends that “people seek auto insurance right away before more rate hikes take effect. Even if consumers are in the middle of their term, it’s worth comparing prices to see if there are any savings they can make.

Gap Insurance can bridge high vehicle values

New vehicles are exceptionally expensive right now due to lack of inventory due to supply chain issues and shortage of computer chips. Total auto claims costs are skyrocketing due to higher appraisals of new and used cars, inflation and supply chain issues, says Keith Daly, president of personal lines for Farmers Insurance.

If your car is destroyed, you can make a collision or comprehensive insurance claim, depending on the cause. The payment for a totaled car is its value at the time of the accident.

This means that if you buy a car now at an inflated price and it is totaled or stolen later when the vehicles value has dropped, you could be in for a tough spot. You would be upside down on your loan (owe more than the value of the vehicle). If you have gap insurance, the difference is covered and saves you financial bottlenecks.

Gap insurance could be important for new car buyers. Gap insurance covers the difference between what you owe on your car loan and the value of your stolen or destroyed car.

Gap insurance should be a priority for car buyers in 2022, Daly says.

Insurance rates for electric vehicles are expected to drop

You know electric vehicles have finally hit the mainstream when Ford releases an electric version of the best-selling F-150. Demand was so high for the Ford F-150 Lightning pickup that Ford stopped taking waitlist reservations.

Additionally, President Biden wants half of vehicles sold in the United States to be zero emissions by 2030. He outlined this goal for electric vehicles and plug-in hybrids in an executive order signed in August 2021.

Electric cars are generally more expensive to insure than other types of vehicles because higher parts and labor costs make them more expensive to repair. Industry watchers say that could change as more electric vehicles hit the market.

“The cost of repairs for EVs may drop once again down the road,” says Alex Leanse, associate editor at MotorTrend. “A lot is still being learned about how to efficiently and effectively design and produce electric vehicles, which brings some inherent complexity for maintenance and repair.”

Higher MSRPs for electric vehicles also contribute to higher insurance costs, but lower-priced models are becoming available. And it helps that the Insurance Institute for Highway Safety found more evidence of electric vehicle safety by testing vehicle models.

Usage-based auto insurance is set to gain momentum

Car insurance companies are under pressure to reduce their reliance on rating factors that are unrelated to actual driving.

Heller at CFA expects 2022 to be filled with plenty of public policy debates about the use of non-driving rating factors. There are laws and regulations in several states regarding the use of things like credit scores, occupations, and gender in auto insurance pricing.

The use of telematics and usage-based insurance (UBI) promises to put more emphasis on driving factors. Telematics technology, which typically uses a plug-in device or mobile phone app, monitors your behavior and driving habits. If your driving score is good enough, you should see lower rates than you would get from a traditional car insurance policy.

Lower rates with usage-based insurance are not suitable for all drivers. A recent TransUnion study found that “insurance rates declined for almost half (48%) of those enrolled in a telematics program, while remaining the same for 30%. Of the remaining respondents, 18% said they had a raise while 4% said they didn’t know. »

Arity reports that about 60% of US-based auto insurance companies offer UBI programs. They believe that more and more insurers will offer usage-based insurance programs in order to attract new customers and retain existing ones.

“Opportunities for consumers to capitalize on their good driving behaviors and declining mileage trends will continue to grow as insurers evolve and personalize their usage-based offerings,” predicts Daly at Farmers.

“Telematics has already made inroads,” notes Loretta Worters, spokeswoman for the Insurance Information Institute. Auto insurance companies will continue to use this data for personalized reports that can encourage motorists to change their driving behavior, she says.

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