Inflation drives up car insurance prices
As if galloping inflation hadn’t already affected enough, auto insurers are having fun raising rates.
The move comes as inflation has raised the price of car repairs, replacements and rentals. The Wall Street Journal reported that insurers are increasing premiums by an average of 6-8%.
The end of the pandemic shutdowns has seen millions of cars back on the road, leading to more accidents and repair costs for insurers. In addition, inflation increases the cost of these repairs.
As a result, Allstate is raising rates an average of 7.1% in 25 states, the company said on an earnings call.
“We started increasing auto insurance rates in the third quarter, and it accelerated in the fourth quarter,” Allstate CEO Thomas Wilson said.
Kemper Corp. (KMPR) – Get the Kemper Corporation report said on its earnings call that it had requested an 11% premium increase on more than half of its personal auto insurance business.
progressive (RPG) – Get the progressive report of the company is seeking to raise tariffs by up to 17% in some locations, the Journal reported, citing documents reviewed by S&P Global Market Intelligence.
State regulators are controlling insurance rates and some requests for double-digit increases are being reduced to double digits, according to the Journal.
Insurers are also victims of supply chain problems
Inflation isn’t the only headwind auto insurers are facing, with supply chain issues also driving up the cost of doing business.
There is currently a shortage of new vehicles on the road as automakers have been unable to purchase the microchips needed to power their modern fleets.
This shortage has caused rental car rates to rise, and many insurance policies offer car rental options to policyholders while their cars are being repaired.
Supply chain issues also lead to delays in getting spare parts
The results of car insurers under pressure
Allstate Corp. (ALL) – Get the Allstate Corporation report reported a 70% decline in net income to $790 million and a 50% decline in adjusted net income to $796 million, primarily due to lower auto insurance underwriting revenue.
“The underlying motor insurance combined ratio was 92.5% for the full year and 100.2% for the fourth quarter of 2021. Although this generated good underwriting income for the year and a good economic performance, the results of the last two quarters are not acceptable,” Wilson said.