Hauser Discusses the Pain in American’s Pockets: Rising Car Insurance Costs

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Hauser Discusses the Pain in American’s Pockets: Rising Car Insurance Costs

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For many people, filling up the tank at the gas station has become a painful weekly reminder of America’s soaring inflation. Still, unfortunately, that isn’t the only expense seeing price hikes for U.S. drivers. According to industry data, the cost of insuring a vehicle now is about $700 higher than before the coronavirus pandemic.

A recent study conducted by the consumer financial services company Bankrate found that an average motorist can expect to spend $1,771 on auto insurance in 2022. That is an increase of over 65 percent since 2019

HAUSER Discusses the Pain in American’s Pockets: Rising Car Insurance Costs

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For many people, filling up the tank at the gas station has become a painful weekly reminder of America’s soaring inflation. Still, unfortunately, that isn’t the only expense seeing price hikes for U.S. drivers. According to industry data, the cost of insuring a vehicle now is about $700 higher than before the coronavirus pandemic.

A recent study conducted by the consumer financial services company Bankrate found that an average motorist can expect to spend $1,771 on auto insurance in 2022. According to the National Association of Insurance Commissioners, that is an increase of over 65 percent since 2019, when annual premiums totaled $1,070 on average. In addition to rising fuel prices and supply chain issues, the cost of car ownership is further increased by growing insurance rates.

There is no mystery as to the source of the increase. According to HAUSER, a full-service brokerage based in Cincinnati, the culprit is an obvious one: inflation. Initially purchased as a small insurance agency by founder Mark Hauser, today, the organization operates on a national scale. It caters exclusively to the needs of private equity firms and their portfolio companies. This includes seeking to aid firms in creating unique insurance solutions, and as a result, Hauser keeps its finger on the pulse of all markets within the industry.

Rates Affected by a number of factors

As the United States sees the highest inflation in four decades, transportation budgets for households are just one of the many to be put under strain. According to the United States Labor Department, the average price of a new car is $46,404, according to Kelley Blue Book, up 12 percent when compared with 2021. However, the bottlenecks and other issues within the supply chain for the auto industry have caused significant delays in producing new cars, which have also seen used car prices skyrocket. Within the past year, the price of used cars has increased by over 40 percent to around $29,000, according to data from Edmunds.

The study conducted by Bankrate found that drivers spend an average of 2.57 percent of their income on car insurance coverage. Still, this percentage can vary greatly depending on several other factors. For example, in Boston, drivers pay as little as 1.3 percent of their annual income, whereas it can be as high as 5.5 percent in Miami. Tampa has a similarly high rate of 5 percent on average. Bankrate posits that the Florida cities may experience higher actual costs because of the frequency with which weather events such as hurricanes and flooding can affect the area, driving up insurance rates as well a result.

Additionally, the relatively low median income of the areas also contributes to the higher percentage put towards auto insurance. However, location isn’t the only factor in the cost of car insurance. Rates can be affected by several other factors, including credit score, driving history, and even adding a teenager to a policy.

A case study in Illinois

When the coronavirus pandemic and subsequent lockdowns saw businesses shuttered and millions of Americans begin working from home, there were far fewer drivers on the road in 2020. As a result of the declining number of drivers, consumer advocacy groups fought to see insurers refund customers, and Farmers Insurance, Allstate, and others eventually returned at least $1 billion to their customers.

However, as the companies were refunding these premiums and wiping out their claim reserves, they were also facing the reality that while drivers on the road were overall down, fatalities were up. For example, in Chicago, the number of drivers commuting downtown in 2021 was still 21 percent below the levels it saw in 2019, according to an annual traffic report by INRIX. However, the Illinois Department of Transportation found that the state saw 1,363 traffic fatalities in 2021, an increase of nearly a third from 2019.

Another factor in rising premiums is inflation affecting other industries. For example, vehicle parts are up around 11 percent compared with the year prior, and hospital care is up roughly 3 percent. This increase certainly affects insurers’ ability to cover claims. When combined with their claim reserves already being lowered from repaying premiums in the year prior, they are in a tight spot that has seen rates rise.

2020 saw many insurers cut rates significantly and offer rebates during the pandemic lockdown. For example, state Farm cut auto insurance rates in Illinois by 13.7 percent. In addition to rate cuts, Allstate started a “Shelter-in-Place-Payback” program, issuing roughly $1 billion in rebates to auto insurance policyholders nationwide. Along with Progressive, these three insurers make up the largest in Illinois and, within the past year, have filed for rate increases with the state’s Department of Insurance in the range of 4.8 to 12 percent.

While Allstate cut rates in the state by around 5 percent in January of 2021, they raised them by 2.5 percent in September of the same year, according to state filings. With a January 2022 filing for a 12 percent increase, the company’s rates now sit higher than before the coronavirus pandemic. Illinois’ largest auto insurer is State Farm. They raised rates by 4.2 percent in February of 2021 and another 4.8 percent in January of this year, keeping them below pre-pandemic levels. Progressive also filed for a rate increase in January, with state filings showing a 6.3 to 10.1 percent depending on whether those insured were direct customers or using an agent.

The back and forth evident in Illinois can be seen across the country, although each state has unique circumstances and problems. For Hauser Insurance, comparison shopping is one surefire way to ensure you are getting the most of your money in a time when inflation is pulling funds from your pocket.

When annual premiums totaled $1,070 on average, according to the National Association of Insurance Commissioners, in addition to rising fuel prices and supply chain issues, the cost of car ownership is further increased by growing insurance rates.

There is no mystery as to the source of the increase. According to HAUSER, a full-service brokerage based in Cincinnati, the culprit is an obvious one: inflation. Initially purchased as a small insurance agency by founder Mark Hauser, today, the organization operates on a national scale. It caters exclusively to the needs of private equity firms and their portfolio companies. This includes seeking to aid firms in creating unique insurance solutions, and as a result, HAUSER keeps its finger on the pulse of all markets within the industry.

Rates are affected by several factors

As the United States sees the highest inflation in four decades, household transportation budgets are just one of the many to be put under strain. According to the United States Labor Department, the average price of a new car is $46,404, according to Kelley Blue Book, up 12 percent when compared with 2021. However, the bottlenecks and other issues within the supply chain for the auto industry have caused significant delays in producing new cars, which have also seen used car prices skyrocket. Within the past year, the cost of used vehicles has increased by over 40 percent to around $29,000, according to data from Edmunds.

The study conducted by Bankrate found that drivers spend an average of 2.57 percent of their income on car insurance coverage. Still, this percentage can vary greatly depending on several other factors. For example, in Boston, drivers pay as little as 1.3 percent of their annual income, whereas it can be as high as 5.5 percent in Miami. Tampa has a similarly high rate of 5 percent on average. In addition, Bankrate posits that the Florida cities may experience higher actual costs because of the frequency with which weather events such as hurricanes and flooding can affect the area, driving up insurance rates as well a result.

Additionally, the relatively low median income of the areas also contributes to the higher percentage put towards auto insurance. However, location isn’t the only factor in the cost of car insurance. Rates can be affected by several other factors, including credit score, driving history, and even adding a teenager to a policy.

A case study in Illinois

When the coronavirus pandemic and subsequent lockdowns saw businesses shuttered and millions of Americans begin working from home, there were far fewer drivers on the road in 2020. As a result of the declining number of drivers, consumer advocacy groups fought to see insurers refund customers, and Farmers Insurance, Allstate, and others eventually returned at least $1 billion to their customers.

However, as the companies were refunding these premiums and wiping out their claim reserves, they were also facing the reality that while drivers on the road were overall down, fatalities were up. For example, in Chicago, the number of drivers commuting downtown in 2021 was still 21 percent below the levels it saw in 2019, according to an annual traffic report by INRIX. However, the Illinois Department of Transportation found that the state saw 1,363 traffic fatalities in 2021, an increase of nearly a third from 2019.

Another factor in rising premiums is inflation affecting other industries. For example, vehicle parts are up around 11 percent compared with the year prior, and hospital care is up roughly 3 percent. This increase certainly affects insurers’ ability to cover claims. When combined with their claim reserves already being lowered from repaying premiums in the year prior, they are in a tight spot that has seen rates rise.

2020 saw many insurers cut rates significantly and offer rebates during the pandemic lockdown. For example, state Farm cut auto insurance rates in Illinois by 13.7 percent. In addition to rate cuts, Allstate started a “Shelter-in-Place-Payback” program, issuing roughly $1 billion in rebates to auto insurance policyholders nationwide. Along with Progressive, these three insurers make up the largest in Illinois and, within the past year, have filed for rate increases with the state’s Department of Insurance in the range of 4.8 to 12 percent.

While Allstate cut rates in the state by around 5 percent in January of 2021, they raised them by 2.5 percent in September of the same year, according to state filings. With a January 2022 filing for a 12 percent increase, the company’s rates now sit higher than before the coronavirus pandemic. Illinois’ largest auto insurer is State Farm. They raised rates by 4.2 percent in February of 2021 and another 4.8 percent in January of this year, keeping them below pre-pandemic levels. Progressive also filed for a rate increase in January, with state filings showing a 6.3 to 10.1 percent depending on whether those insured were direct customers or using an agent.

The back and forth evident in Illinois can be seen across the country, although each state has unique circumstances and problems. For Hauser Insurance, comparison shopping is one surefire way to ensure you are getting the most of your money in a time when inflation is pulling funds from your pocket.

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