Car Insurers Rush to Raise Rates as Inflation Takes a Toll
March 9, 2022— According to a story in The Wall Street Journal, insurers are boosting premiums up to double digits to try and get ahead of inflation, which has boosted the prices of car repairs, replacements and rentals.
After enjoying a profitable year in 2020 when COVID lockdowns kept many drivers off the roads, insurers struggled in the second half of 2021. Many auto insurers posted dismal fourth-quarter results, and laid out plans to raise rates.
Allstate Corp. has announced it's raising rates by an average of 7.1 percent across 25 states, its executives said on an earnings call, and more increases are expected ahead.
“We are continuing to go at a very fast pace across other states and even in some cases, the same states again, with rate increases as we get new data and new trends,” says Glenn Shapiro, a senior Allstate executive.
Insurers are feeling pressure on all sides of their business. Traffic is at or near pre-pandemic levels across the U.S., and accidents have risen dramatically. More accidents mean more replacement cars and repairs.
Meanwhile, it's taking longer for auto body shops to fix cars because of delays in obtaining replacement parts, so insurers are paying for more rental car days.
Speeding and distracted driving are also on the rise, resulting in more serious and fatal crashes. Allstate also cited medical inflation as a problem.