There are many factors to consider in the rise in automobile insurance premiums. It’s a combination of record-setting natural disasters, an uptick in distracted-driving accidents, mandatory government-imposed safety features, recent government tariffs, and higher steel/aluminum production cost and higher labor rates in Mexico.
A slew of devastating natural disasters struck the U.S. in 2018, resulting in insurance claims costs over 100 billion dollars. Additionally, distracted driving has led to an increase in accidents on the road. These factors, coupled with the fact that the auto industry is moving toward higher-tech cars that are more expensive to repair, contribute to high claim costs for insurers.
An additional possible contributor to future rate hikes is the increased frequency in car crashes attributed to distracted driving—caused in large part by more people using their phones while driving. The National Highway Traffic Safety Administration (NHTSA) reports that 2.443 million people were injured in distracted driving crashes in 2015, which is an increase from 2.217 million people in 2011. Insurers respond by raising rates to make up for the rise in insurance claims they have to pay out.
Higher repair costs for new vehicles—which are increasingly packed with sensitive and expensive technology—mean insurers are likely to increase premiums to make up for this increase in losses. As of May 2018, all new vehicles are required to have rear-view video systems (backup cameras) by NHTSA regulations. Although this type of vehicle technology has proven to reduce the number of accidents caused by human error, it has also made common and previously inexpensive repairs—such as bumper replacement—more expensive, increasing the potential losses for insurance companies.
Already, government tariffs on aluminum and steel sourced outside of the U.S. have to lead to vehicle increase. The Center for Automotive Research predicts the expansion of North America capacity for auto assembly, parts and components, manufacturing, and steel/aluminum production and higher labor costs in Mexico call under the newly proposed United States-Mexico-Canada Agreement (USMCA) treaty may add up to 3.5% to the price of a new car. All these factors may increase premiums more than 8% in Illinois, and higher is other states.
My suggestion is to put your seat belt, its going to be a bumpy ride.