Oct. 5, 2021—Sharply higher costs to repair and replace vehicles will cause insurance companies' underwriting profit margins to narrow significantly.
According to projections from S&P Global Market Intelligence's annual US Auto Insurance Market Report, the number of automobile crashes is rebounding toward pre-pandemic levels, and the average cost to settle claims is rising as costs for motor vehicle body work and used vehicles increase rapidly.
"Auto insurers provided estimated premium relief of as much as $16.4 billion to their customers in 2020 as Covid-19 curtailed commuting and leisure travel," said Tim Zawacki, principal analyst for FIG at S&P Global Market Intelligence. "In 2022, some of those customers may face higher auto insurance rates as carriers respond to a return to normal driving patterns and claims costs continue to climb."
Some auto insurers will continue to pursue sizable rate increases in response to the adverse claims trends. The report projects growth in personal auto direct premiums written of 3.1 perent in 2021 and 5.4 percent in 2022. Commercial auto premiums are projected to rise 14.2 percent in 2021 before slowing to 8.4 percent in 2022.
