let’s talk about car insurance buyers’ prospects in 2022: rates are expected to rise in 2022, owing to risky driving and expensive claims. Because of this, as well as the consequences of inflation and supply-chain disruptions, comparison shopping for a good rate is more important than ever.
The good news is that the cost of auto insurance for electric vehicles is expected to fall, and industry observers believe usage-based insurance could save some money for good drivers.
Here Are Some Additional Trends That Car Insurance Buyers` Prospects to see in 2022.
Unsafe Driving Contributes To Higher Car Insurance Rates
An increase in speeding since the pandemic, a record number of fatal crashes, and rising claim costs are all likely to result in higher overall car insurance rates in 2022.
Arity, an Allstate-owned mobility data analytics company, discovered that time spent traveling at speeds exceeding 80 mph is approximately 10% higher than pre-pandemic levels. According to Arity data, nearly one out of every twenty miles driven is at speeds exceeding 80 mph.
This lead-foot mentality is most likely contributing to the recent increase in traffic fatalities. The National Highway Traffic Safety Administration (NHTSA) discovered an 18.4 percent increase in fatal crashes in the first six months of 2021 compared to the same period in the previous year. This was the NHTSA’s highest percentage increase on record.
High-speed car accidents are far more catastrophic, resulting in larger insurance claim payouts. And claims usually raise drivers’ rates because car insurance companies pass on their increased costs to customers in the form of higher rates—even if they don’t make any claims.
Rate Hikes Are Exacerbated By Inflation
Inflation can also raise the cost of car insurance. According to Richard Attanasio, senior director at A.M. Best, “inflation trends and supply chain constraints could continue to pressure rates, causing insurance premiums to rise.”
According to a CCC Intelligent Solutions study, the average cost of auto parts—from airbags to bumpers—will rise by 6% in 2021, the largest increase since 1997.
Drivers seeking relief from the effects of inflation on car insurance may be more likely to shop around and secure a low rate. Policies typically last six to twelve months, so if car insurance rates rise during that time, your rate is already set until the end of your policy term.
The Consumer Federation of America’s (CFA) insurance expert, Doug Heller, recommends that “people shop around for auto insurance right away before more rate hikes take effect.” Even if consumers are in the middle of their policy term, it is worthwhile to compare prices to see if they can lock in some savings.”
Gap Insurance Can Help Bridge The Gap Between High Vehicle Values
New vehicles are extremely expensive right now due to a lack of inventory caused by supply chain issues and a computer chip shortage. According to Keith Daly, president of personal lines for Farmers Insurance, the costs for totaled car claims are skyrocketing due to higher new and used car valuations, inflation, and supply chain issues.
If your car is totaled, depending on the cause, you can file a collision or comprehensive insurance claim. The payout for a totaled car is the value of the vehicle at the time of the accident.
That means that if you buy a car now at an inflated price and it is totaled or stolen later when vehicle values have dropped, you may be in a difficult situation. Your loan would be in default (owe more than the value of the vehicle). The difference is covered by gap insurance, which keeps you out of financial trouble.
Gap insurance may be necessary for new car buyers. The difference between what you owe on your car loan and the value of your totaled or stolen vehicle is covered by gap insurance.
According to Daly, gap insurance should be a top priority for car buyers in 2022.
Electric Vehicle Insurance Rates Should Decrease
When Ford introduces an electric version of its best-selling F-150, you know electric vehicles have finally entered the mainstream. The Ford F-150 Lightning pickup was so popular that Ford stopped taking reservations for the waitlist.
Furthermore, President Biden wants half of all vehicles sold in the United States to be zero emissions by 2030. In an executive order signed in August 2021, he outlined this target for electric vehicles and plug-in hybrids.
Electric vehicles have historically been more expensive to insure than other types of vehicles due to higher parts and labor costs. According to industry observers, this could change as more EVs hit the market.
“When more EVs are on the road, the cost of repairs for EVs may come down,” says Alex Leanse, associate editor at MotorTrend. “Much remains to be learned about how to effectively and efficiently design and manufacture EVs, resulting in some inherent complexity for maintenance and repair.”
Higher EV sticker prices contribute to higher insurance costs, but lower-cost models are becoming available. It also helps that the Insurance Institute for Highway Safety has discovered more evidence of EV safety while testing vehicle models.
Auto Insurance Based On Usage Should Gain Traction
Auto insurance companies are under pressure to reduce their reliance on non-driving-related pricing factors.
Heller at the CFA anticipates a flurry of public policy debates about the use of non-driving rating factors in 2022. There is legislation and regulatory action in several states concerning the use of credit scores, occupations, and gender in car insurance pricing.
Telematics and usage-based insurance (UBI) have the potential to place a greater emphasis on driving factors. Telematics technology, which typically employs a plug-in device or a mobile phone app, monitors and records your driving habits. If your resulting driving score is satisfactory, you should be able to obtain lower rates than you would with a traditional auto insurance policy.
Lower usage-based insurance rates do not benefit all drivers. According to a recent TransUnion study, “insurance rates decreased for nearly half (48%) of those enrolled in a telematics program while remaining the same for 30%.” “Of the remaining respondents, 18% reported an increase, while 4% said they didn’t know.”
According to Arity, approximately 60% of auto insurance companies in the United States offer UBI programs. They believe that even more insurers will offer usage-based insurance programs in order to attract new customers and retain existing ones.
“As insurers evolve and customize their usage-based offerings, opportunities for consumers to capitalize on their good driving habits and lower mileage trends will continue to expand,” Farmers’ Daly predicts.
“Telematics has already made inroads,” says one expert.
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