What’s Driving Car Insurance Costs?
Rising repair costs, distracted driving and congested roadways are pinching the pocketbooks of automobile insurance companies and their customers, according to the Insurance Information Institute.
Between 2014 and 2016, total claims costs for car insurance rose 13 percent — more than 10 times the inflation rate. The Institute study also showed the amount paid by auto insurance companies for claims and expenses exceeded premiums collected from customers every year since 2007. This has led to higher rates for drivers.
Alfa Insurance® President and CEO Jimmy Parnell said the Alabama-based company is working to lessen the impact on its policyholders.
“We know our customers work hard for their money and have choices when it comes to insurance,” Parnell said. “Our entire management team is committed to doing everything possible to keep our overall costs low while maintaining best-in-class service.”
Alabama Department of Insurance Deputy Commissioner and Chief Actuary Charles Angell said he's seeing more personal auto insurance rate filings this year.
“The proposed rate increases are averaging slightly higher than last year, though still in the 5-10 percent range,” Angell said. “Insurers are noting the uptick in claim frequency, average repair costs and average medical costs. Everyone is citing the increased frequency being due largely to accidents caused by distracted driving and distracted pedestrians. The increased severity is influenced by more costly electronics now built into cars, and by more frequent plaintiff attorney involvement in claims.”
Alfa has battled rising costs by aggressively managing expenses, cracking down on fraud and educating drivers about one of the most troubling trends — distracted driving.
The National Highway Traffic Safety Administration reported 3,477 people were killed by distracted driving in 2015 (the most recent data available), an increase of 7.2 percent from the previous year. Meanwhile, a National Safety Council survey found 74 percent of drivers admitted to using Facebook while driving.
Alfa is working to educate adults and teens about the dangers of distracted driving through social media, a statewide billboard campaign and sponsorship of local awareness efforts.
Ironically, technologies to reduce accidents have led to increased claims costs and, ultimately, higher premiums. The Institute report showed the cost of automobile body work increased 40 percent more than the rate of inflation since 2005.
CCC Information Services found the number and complexity of parts replaced per accident also are on the rise. For instance, the cost of a replacement pickup truck headlight increased from $199 in 2004 to $515 in 2015. Other parts, like distance sensors in vehicle grille assemblies, did not exist three years ago. That sensor costs almost $3,000 to replace.
The cost of repairs is a leading factor in claims severity, but the Institute noted frequency of claims also has increased. Lower unemployment, less expensive gasoline and an improving economy mean more cars on the road — and more accidents.
During the last year, U.S. drivers traveled about 50 billion miles more than the previous year and 166 billion miles more than a decade ago.
All these factors spell higher costs for insurers and customers. Fast Track Monitoring reported increased costs in the last two years for bodily injury, up 15.3 percent; property damage, up 15 percent; personal injury protection, up 14.1 percent; collision, up 13.2 percent; and comprehensive claims, up 22.5 percent.
Contact an Alfa agent for help with getting the best value in car insurance, or for more information visit AlfaInsurance.com.