By Lorie Lewis Ham
You may have noticed that car insurance rates have been going up this year, and sadly there is more of that coming. According to a February 2023 article in the Los Angeles Times, California Insurance Commissioner Ricardo Lara has approved some big rate hikes for California drivers in the last six months, ending a long COVID break after insurance companies complained they were losing money. And sadly, more increases are on the way across the country. According to ValuePenguin, insurance rates are expected to go up 8.4% in the US in 2023, the largest rate increase in six years.
The LA Times article went on to state that according to a Bankrate analysis, premiums are rising nationwide as people drive more miles, drive less safely, and wreck increasingly expensive cars. Inflation is hitting all areas of life and many people are afraid of an impending recession. According to Bankrate.com, recessions can affect car insurance as well, so understanding how the economy impacts insurance may help you prepare if we do slip into an economic downturn. Inflation can be seen in the cost of repair parts, labor, and medical care, and when insurance companies have to pay out more, that is going to be passed on to the customer. There has also been an increased frequency and severity of crashes, accompanied by record levels of personal injury judgments and vehicle thefts.
As mentioned, the increasing cost of buying a car is definitely a factor in the cost of auto insurance. More people are looking into buying electric cars and generally they are more costly to insure. Bankrate.com states that electric vehicles are pricier to both buy and repair and insurance providers may charge their drivers more for coverage.
“Our company, Mennonite Aid Plan, doesn’t write auto insurance. But our agency, Mennonite Insurance Services, writes auto insurance for other companies,” shares Jerry Linscheid, CEO for Mennonite Aid Plan/Mennonite Insurance. “That means we have a lot of auto insurance customers who are impacted by changes in the auto insurance market.”
We asked Jerry a few questions that we hope will help readers wrap their heads around why car insurance is going up, what they need to be aware of, and what, if anything, can be done about it.
Q: What are some of the ways that the changes are affecting your customers?
Jerry: Since people have been driving more after the 2020 lockdown, claims have gone up, meaning premiums have gone up. Also, companies are getting much more selective about whom they will insure in the first place. We are seeing companies require liability limits of at least $100,000 per person/$300,000 per accident. People with an at-fault accident will probably get non-renewed.
Q: Are you able to help them navigate these changes and get the best deal available?
Jerry: We can certainly help them navigate the new reality, but we can’t change it. We have multiple auto companies we can write with. Price is often the driving factor from a customer’s perspective, but we want to also look at the coverages. There are optional coverages, such as towing and rental car expense. That may or may not be important to the customer. Property coverage on the vehicle (comprehensive and collision) may be optional if there is no lender on the vehicle. The deductible on the property coverage also affects the premium. We can help the customer think through how much exposure they can handle on their own versus how much exposure should be insured.
Q: Can you answer their questions about the changes they are facing?
Jerry: We are trying to be proactive and let our customers know that this is a difficult time for auto insurance. It is not the case now that lots of companies want your business. Now is not the time to be driving while distracted or impaired. If you lose your insurance for reckless driving, it will be nearly impossible to get good insurance. You may have to settle for low coverage / high premium coverage for a while.
Q: Anything else you would like to share on the subject?
Jerry: Most economic situations are cyclical. We expect, in time, the factors that caused this situation will reverse and auto insurance will become easier to acquire. We don’t expect premiums to fall dramatically. Vehicles are becoming more expensive to repair. With all the electronic sensors in today’s vehicles, a small fender bender can create a major repair bill. The bodily injury portion of a claim has risen fast in recent years. When the cost of claims goes up, insurance companies are required to charge a premium that will pay for those claims. If you need help navigating the changes in auto insurance, you can reach out to Mennonite Insurance Services and they will be happy to help you in any way they can. You can contact them at 559-638-2327. In the meantime, do everything you can to keep your driving record in good shape.