While most of us are feeling the pain from global inflation and supply chain problems in our everyday purchases, some of the effects are more insidious and invisible. Insurance premiums are also on the rise. In particular, vehicle insurance has seen a sharp increase in the past year due to shortages of microchips and vehicle parts for repair. This is due to rising costs driving up the price tag of vehicle repair for insurance companies, who then pass on these higher costs to insurance subscribers. Simply put, insurance claims have gotten more expensive.
The Pandemic is Two Years Old, So Why Are Costs Rising Now?
During the most acute phase of the early pandemic, people were staying home and not using their vehicles. This resulted in fewer accidents and a drop in insurance claims. In fact, at the time, some insurance companies were lowering premiums for customers who weren’t driving as much.
As pandemic lockdown and infection mitigation protocols have waned, many people have begun driving more again. They may have returned to the office, at least part-time. Traffic is up, resulting in more accidents. Americans are traveling again. In fact, to avoid still-complicated airplane travel, many Americans are choosing driving vacations.
Supply Chain Disruptions
While much of the world is getting back on its feet after the global pandemic, the supply chain has still not recovered to pre-pandemic efficiency. According to a recent New York Times article, repair of the global supply chain will require investment, technology, and a reworking of the incentives available to global businesses. More cargo ships and port workers are needed, warehousing is in flux, and the trucking industry still has critical labor shortages. Overall, economists are predicting, that it may take years to iron out problems.
“It’s unlikely to happen in 2022,” Phil Levy, chief economist at Flexport, a freight forwarding company based in San Francisco, told the New York Times. “My crystal ball gets murky further out.”
With suppliers unable to sell critical vehicle parts to auto shops, repairs are taking longer and costing more money.
With costs rising on everything from fuel to groceries to professional services, vehicle repairs are simply costing more than they did a few years ago, even if the parts are available. In addition, labor shortages of vehicle technicians mean repairs are taking longer.
Bankrate has reported that several major auto insurance companies, including Allstate, Progressive, Geico, and State Farm, increased their rates in late 2021 or early 2022 in several states. Allstate and its subsidiaries have had 20 rate increases approved in 13 states since November 2021. S&P Global Market Intelligence has found that rate increases from a sample of vehicle insurance providers vary from a modest three percent to just under 12 percent.
Talk to Your Insurance Agent
To see how you can mitigate the impact of rising costs on your budget, talk to your insurance agent. In Connecticut, Petruzelo Insurance offers personal and business policies that fit your needs and protect your financial interests. CALL TODAY!