Revealed – what's really driving auto insurance costs?

Auto insurance costs in the US continue to climb thanks to growing “external forces” that are outside the control of insurers, a new report by the National Association of Mutual Insurance Companies (NAMIC) has revealed.

NAMIC’s new report, “Cost Drivers: How Riskier Roads, Rising Repairs, and Reckless Driving are Increasing Insurance Costs,” analyzes the factors that are contributing to auto insurance rate increases. It looks into extensive federal, state, and industry data related to driving patterns, behaviors, and costs of modern vehicle ownership and insurance.

The insurance association noted that the operative word contributing to higher auto insurance is “more,” as it found the following:

• More drivers on the road than ever before – Now estimated at 230 million drivers;
• More distracted driving – Driver inattention accounted for nearly 1 million crashes in 2019;
• More impaired driving – 10,000 lives were lost to alcohol-impaired driving in 2019;
• More expensive cars, parts, and repair processes – The average cost of a new car in 2021 is $40,000;
• More expensive medical care – From 2010 to 2017, bodily injury claim frequency increased every year, accompanied by increases in claim severity of nearly 30%;
• More extreme weather – The percentage of dollars paid out in catastrophe-related auto claims is up more than 4% since 2011;
• More theft and fraud – Auto thefts increased by 9.2% in 2020, after declining in the two years prior; and
• More drivers skipping purchasing insurance – The percentage of drivers nationwide who are uninsured is 12.6%.

“There’s an important story to be told, and it starts with the fact that most costs involved in providing auto insurance are driven by external forces outside the control of auto insurers,” said NAMIC director of auto and underwriting policy Tony Cotto. “Among those cost factors are the number of autos on the road, auto and road design, driver behavior, and weather.”

NAMIC prescribed a number of solutions to address the rising costs of auto insurance. They include (but are not limited to):

• Promoting consumer choice when it comes to choosing between original and non-original equipment manufacturer parts in the repair of their vehicles.
• Removing restrictions on direct repair programs and encouraging the preferred repair shop model among insurers.
• Protecting consumers access to information systems in their vehicles.
• Encouraging “sound underwriting” – making insurers match risk to rate and provide the best coverage at the most accurate cost for consumers.
• Removing restrictions on discounts and rebates through programs such as autopay, electronic signature/online payments, pay-in-full, and purchase in advance.