2022 outlook for auto insurance patrons – Forbes Advisor – Forbes

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Car insurance rates are expected to increase in 2022, partly due to risky driving and costly claims. That, along with the aftermath of inflation and supply chain disruptions, means comparative buying for a good price is more important than ever.

The good news is that electric vehicle costs will come down with auto insurance, and industry watchers say usage-based insurance can offer some savings for good drivers.

Learn more about the trends that auto insurance buyers can expect in 2022.

Unsafe driving contributes to car insurance price increases

An increase in speeding since the pandemic, record numbers of fatal accidents and rising claims costs are expected to result in higher overall car insurance rates in 2022.

Arity, a mobility data analytics company owned by Allstate, found that the time spent traveling at speeds above 80 mph is about 10% higher than pre-pandemic levels. Arity data also shows that nearly 1 in every 32 miles driven is over 80 mph.

This lead-footed mentality is likely a factor in the increase in road deaths over the past year. The National Highway Traffic Safety Administration (NHTSA) noted an 18.4% increase in fatal accidents in the first six months of 2021 over the same period in 2020. This was the highest percentage increase the NHTSA had ever seen.

Car accidents at high speeds are much more catastrophic and result in higher insurance claim payouts. And damage usually causes driver rates to rise, as car insurance companies pass their increased costs on to customers in the form of higher rates – even to customers who have not made any claims.

Related: How much do insurance premiums increase after an accident?

Arity notes that “many drivers will pay more in 2022 as insurance companies begin raising tariffs to cover 20-year increases in claims costs, partly due to higher mileage and riskier driving since the pandemic that the severity of accidents. "

Inflation contributes to interest rate hikes

Inflation can also drive car insurance rates higher. Richard Attanasio, Senior Director at A.M. Best notes that "inflation trends and supply chain constraints could continue to put pressure on rates and drive insurance premiums up."

According to a study by CCC Intelligent Solutions, the average cost of auto parts – from airbags to bumpers – rose 6% in 2021, the largest increase since 1997.

Motorists looking for some relief from the effects of inflation on car insurance are more likely to shop around and get a low tariff. The policies have terms of six to 12 months. If, during this time, there are rate increases for the motor vehicle insurance, your rate will already be blocked until the end of the contract period.

Doug Heller, insurance expert for the Consumer Federation of America (CFA), recommends that “people look for auto insurance immediately before any further rate increases take effect. Even when consumers are in the middle of their contract period, it is worth comparing prices to see if they can make some savings. "

Gap insurance can bridge high vehicle values

New vehicles are currently exceptionally expensive due to lack of inventory due to supply chain issues and the scarcity of computer chips. The cost of total auto damage is skyrocketing due to higher new and used car valuations, inflation, and supply chain problems, says Keith Daly, president of the retail business at Farmers Insurance.

If your car is a total loss, you can make a collision or fully comprehensive claim, depending on the cause. The payout for a car that has been totaled is the value at the time of the accident.

That said, if you buy a car now at an inflated price and it is later used up or stolen when the vehicle's value has gone down, you could be in an awkward position. You would turn your credit upside down (owe more than the value of the vehicle). If you have gap insurance, the difference is covered and protects you from financial bottlenecks.

For new car buyers, a gap insurance could be important. Gap insurance covers the difference between what you owe on your car loan and the value of your damaged or stolen car.

Bridge insurance should be a priority for car buyers in 2022, Daly says.

Insurance tariffs for electric vehicles should fall

They know electric vehicles finally made it into the mainstream when Ford launched an electric version of the best-selling F-150. The demand for the Ford F-150 Lightning Pickup was so great that Ford stopped accepting reservations for the waiting list.

In addition, President Biden wants half of the vehicles sold in the United States to be emission-free by 2030. He set this target for electric vehicles and plug-in hybrids in an implementing regulation signed in August 2021.

Electric cars tend to be more expensive to insure than other types of vehicle because higher parts and labor costs make them more expensive to repair. Industry watchers say this could change as more electric vehicles hit the market.

"The repair costs for electric vehicles could drop again," says Alex Leanse, Associate Editor at MotorTrend. "There is still a lot to be learned about how to develop and produce EVs effectively and efficiently, which adds a certain complexity to maintenance and repair."

Higher MSRPs for EVs also contribute to higher insurance costs, but cheaper models are becoming available. And it helps that the Road Safety Insurance Institute found more evidence of electric vehicle safety while testing vehicle models.

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Usage-based auto insurance should gain momentum

Auto insurance companies are under pressure to reduce their reliance on pricing factors unrelated to actual driving.

Heller of the CFA expects 2022 to be filled with much public policy debate about the use of non-driving assessment factors. Several states have laws and regulations in place about the use of factors such as creditworthiness, occupation, and gender in auto insurance pricing.

The use of telematics and usage-based insurance (UBI) promises to place greater emphasis on driving factors. Telematics technology, usually using a plug-in device or mobile phone app, monitors your driving behavior and habits. If your resulting driving result is good enough, you should see lower rates than you would get from traditional auto insurance.

Lower tariffs with usage-based insurance are not suitable for all drivers. A recent study by TransUnion found that “Almost half (48%) of those participating in a telematics program have had their insurance rates down, while 30% have stayed the same. Of the remaining respondents, 18% said they saw an increase, while 4% said they didn't know. "

Arity reports that approximately 60% of US-based auto insurance companies offer UBI programs. They believe that even more insurers will offer usage-based insurance programs to attract new customers and keep existing ones.

“The opportunities for consumers to benefit from their good driving behavior and the trends towards lower mileage will continue to increase as insurers evolve and adapt their usage-based offerings,” predicts Daly of Farmers

"Telematics has already arrived," says Loretta Worters, spokeswoman for the Insurance Information Institute. Auto insurance companies will continue to use this data for personalized reports that can encourage motorists to change the way they drive, she says.

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