Entering into a new year with unlimited optimism? Allow this article to give you some bad news. According to the car insurance sector, car insurance rates will increase in 2022. This may be due to high inflation, more fatal accidents, or increased dangerous driving. This article informs you why SUV insurance prices will increase in 2022!
1-Inflation
Inflation is one of the factors that will increase car insurance prices in 2022. Statistics show that the Consumer Price Index increased by 7 per cent between 2020 and 2021. This suggests that, on average, you are spending 7 per cent more than you were a year ago for various services and products.
Inflation hit the used and new vehicle markets last year. The prices of new cars have risen by more than 10 per cent between 2020 and 2021, while the prices of used cars have increased by more than 30 per cent. Cars have also become more complex than they were in the past. Even minor accidents can result in thousands of dollars of damage that need specialized repairs.
Car costs aren’t the only issues hit by inflation. The cost of healthcare has also increased. Findings from Medicare and Medicaid show that healthcare spending rose by about 10 percent in 2020. This suggests that if you are involved in a car accident, the resulting medical expenses are higher than before.
Because car insurance is supposed to cover your medical costs and property damage after an accident, anything that increases these expenses will increase the insurance price. Insurance companies need to ensure they have adequate funds to cater for claims, so car insurance price is affected if inflation pounds.
2-Supply chain disruptions
Another factor that will lead to an increase in car insurance prices is the disruptions in the supply chains in recent years. Coronavirus pandemic decreased demand in various sectors in 2020. With few individuals on the roads and cars getting less use, there was a decrease in demand for car parts.
The auto segment is among the industries that have been affected by these disruptions. Repair costs, labor, and vehicle parts are more expensive. One of the most significant car-related supply chain disruptions was the shortage of semiconductors or chips. These parts are used in various vehicle applications, including electronic mechanisms, entertainment systems, and driver assistance systems.
In December last year, more than fifty business leaders, including Toyota Motor North America, General Motors, Ford Motor Company, and American Honda Company, sent a letter to Congress requesting them to encourage governing bodies to create their semiconductor investigation, production method, and design to increase available jobs and semiconductors’ supply.
3-Labor shortages
Labor shortages have lowered the availability of skilled workers. According to the Bureau of Labor, the unemployment rate was about 4 percent as of December last year, which was about 10 percent lower than the preceding year. The COVID-19 pandemic has also influenced workers to reconsider their career paths, which has led to increased labor shortages.
Fewer workers can lead to increased car insurance prices. You are likely to pay more if fewer are available to perform a given task, including healthcare and car repair jobs. For example, you used to pay a mechanic about $100 to repair bumpers in the past. Today the same mechanic takes less time off and works for longer days to cover for the reduced labor force. As a result, the same mechanic will today charge you about $300 to repair the same bumpers. This suggests that you will need to pay a higher insurance price for your car since the insurance company will need to cover increased expenses.
4-Changing driving habits
Since the start of the coronavirus pandemic in early 2020, you have witnessed an unprecedented decrease in driving levels. Many people stopped going to work, school, or commuting to other activities. Accidents were fewer, and streets were silent. This compelled many insurance companies to refund most of their policyholders.
But in 2021, you witnessed the pre-pandemic driving habits that have led to increased accident severity and auto insurance claims. According to the NHTSA, there was an 18 percent increase in fatal accidents in 2021 compared to 2020.
These changes in driving habits mean that insurance companies may need to restructure their claim reserves in 2022-the money they will use to pay for losses. This means that you will need to pay higher premiums for your car.
There you have it! Some factors that may lead to increased car insurance prices include changing driving habits, labor shortages, supply chain disruptions, and inflation. Now that you know that car insurance prices will increase in 2022, you need to find ways to save money if your car insurance policy becomes too expensive. Contact today to advise you on ways to get more affordable rate!
