There’s no denying that inflation is on the rise like we haven’t seen in decades. All you need to do is go to the grocery store or fill up your gas tank and you will feel the pinch. The official numbers say, as of October 2021, inflation has risen 6.4%, not including food prices.
I’ve been in the insurance industry since 2008 and I’m seeing rate increases across almost all lines of insurance like I’ve never seen. What’s driving this massive increase in insurance prices?
Used Car Prices
Every car on the road today is a used car. Once you’ve driven your new car off the lot it is now a used car. According to the U.S. Department of Labor, used car prices have skyrocked by 26.4% in the last 12 months. This impacts many parts of your auto insurance policy. Property Damage Coverage, Collision, Comprehensive and uninsured motorist property damage coverage are all areas of your car insurance policy that impacted by the price of vehicles. Not only are car prices up significantly, but so is the cost to repair damaged cars. So whether your car is a total loss, or a partial loss, the cost of your car accident is much higher today than it was last year.
The cost of auto glass has climbed tremendously in the past year. A big portion of your comprehensive premium is tied to the cost of auto glass. This is especially the case if you have a glass endorsement on your auto policy, sometimes referred to as “Full Glass”. Most auto glass is imported from foreign countries. Not only are cargo ships backed up, the cost of a shipping container has increased more than 5 times in the past year! On average, glass experts have estimated a 2015 (or newer model) windshield replacement has gone up 30-40% in the past year. Older vehicle windshields installations haven’t increased at such a high rate. This is due to the calibration required on newer windshields. Calibrating a windshield is required for cars that have technology such as automatic breaking and adaptive cruise control. A windshield calibration will add $250-$400 to the cost of a windshield replacement.
Rental Car Costs
If you cause an auto accident and the person you hit needs a rental car for 20 days while their car is being repaired, that could easily cost triple what it would have cost last year. Rental cars can exceed $100 a day for a large SUV or pickup. Add to this problem that many cars have parts on back order, which causes an even longer rental car need, which the at-fault party is liable for.
If you’ve owned a home along the Colorado front range for more than 7 years, chances are you’ve experienced hail damage at your house. All components of your roof are increasing massively. Industry experts estimate the cost to replace your roof has increased 30-40% in the past 2 years. This is driven by all components and labor costs associated with a roof increasing. Some materials that have taken the largest increase are the metal components to your roof, plywood (if needed) and the shingles themselves. What was a $20,000 roof in 2019 could easily be a $27,000 roof today. That’s a $7,000 increase on a claim that is quite common in Colorado!
Increased Costs of Doing Business
- Payroll Costs: It costs more to hire and retain good employees today than it did last year. Insurance companies are like any other industry. Much of their expenses are payroll related. As payroll increases, so do the operating costs of the insurance companies.
- Gas Prices: People don’t think about gas prices as having an impact on your insurance, but they do. Insurance companies hire thousands of claims adjusters who are driving every day inspecting damage. The insurance company is paying higher transportation costs.
- Health Insurance: Have you looked at your health insurance costs for 2022? How much are they going up by? Insurance companies provide group health insurance to hundreds of thousands of people. As health insurance costs increase, the costs to run an insurance company increase.