WHY ARE AUTO INSURANCE RATES SOARING?
Davide Dayen’s article "Why Auto Insurance Rates Are Out of Control" from The American Prospect discusses the reasons behind the significant rise in auto insurance rates.
Auto insurance costs have risen by 22.6% over the past year, marking the fastest increase in 50 years and the significant reasons include the follow:
- Vehicle Repair Costs: Higher repair costs for vehicles are a major contributor. If fixing cars is expensive, insurance companies charge more to cover these costs.
- Industry Changes: Shifts in the auto industry, such as changes in the business models of dealerships and the rise of electric vehicles (EVs), also affect repair and insurance costs. EVs require less maintenance but are expensive to repair due to advanced technology.
- Insurance Company Strategies: Insurance companies may be coordinating prices to recover from pandemic-related losses. They gave rebates during the pandemic when fewer accidents occurred, but these rebates were smaller than what consumers deserved.
- Climate Change: Extreme weather events, like hurricanes and floods, damage cars, increasing the cost of insurance.
- Profit Margins: Despite the rising rates, insurance companies like Geico, Allstate, and Progressive are making record profits due to higher premiums and fewer claims.
- Data and Surveillance: Newer cars collect driving data that insurance companies use to adjust rates based on driving behavior. This practice raises privacy concerns and can lead to undisclosed rate increases.
- Regulatory Issues: State insurance regulators require extensive data for rate increases, creating backlogs. Some insurers have left the market, reducing competition and leading to higher premiums.
- Interest Rates: Federal Reserve interest rate hikes have impacted insurance companies’ investments, leading to financial losses that contribute to higher insurance rates.
- Lack of Regulation: There's minimal regulation on auto data collection, and lawmakers are pushing for frameworks to protect consumer privacy.
Dayen’s article emphasized that these rising costs are not linked to government spending or typical inflation drivers but are more about industry practices, climate impacts, and regulatory gaps.
If you’ve been struck by a motor vehicle you should seek assistance from a lawyer experienced in collision cases.
For more direct answers to your questions, call Steve Giacoletto at the Giacoletto Law Firm at 618-346-8841 or toll-free at 888-346-8841 to speak today with an experienced Madison County, St. Clair County, and Southern Illinois accident and injury lawyer located in Collinsville, Illinois.
