In 2020, the pandemic hit. Suddenly, people started driving much less as they stopped commuting, going on vacation and seeing friends and family. “Miles driven went down, so claims went down.”
Because insurers collected more than they paid in claims, they returned that money to consumers through refund checks and reduced premiums. But in 2021, drivers returned to the road—and so did car accidents. Dangerous driving has increased post-pandemic, with more people speeding, driving recklessly and becoming distracted with mobile devices and in-vehicle screens.
“People are looking down when they drive now,” says Jeff Schlitt, owner of Schlitt Services, an independent insurance agency in Vero Beach, Florida.
The result has been more crashes and claims. Car crash fatalities were up more than 10 percent in 2022 compared with 2020, according to the most recent data available from the National Highway Traffic Safety Administration.
Repairs are more expensive now too. “Vehicles are built with all these new safety features, which is great but adds to the cost,” says Schlitt. “It used to cost $300 to replace a broken windshield, but now it can cost over $1,000 with all the technology.”
Auto repair shops still deal with inflation, supply chain issues and labor shortages. They are passing on these costs to consumers and their insurers. Repairs are taking longer as garages wait on parts, meaning auto insurance policies must provide policyholders with longer vehicle rentals.
Used cars also have been retaining more of their value post-pandemic because of higher demand. If you total your car, most auto insurance policies pay the value of your vehicle on the day of the crash. Because used vehicles are worth more, on average, than they used to be, they are more expensive for insurers to replace.
Finally, more lawsuits are being filed. If you cause an accident, you’re liable for covering the repairs and medical bills of the injured parties. Inflation has pushed up these costs for insurers as well.
These days, people are more likely to sue and to be awarded much larger settlements for their injuries than in the past. Auto insurance policies usually cap what they pay for lawsuits against you at $500,000 if you buy the maximum coverage.
You might buy an umbrella policy with additional liability coverage to protect against lawsuits beyond your auto liability limit. As seven-figure settlements become more common, umbrella insurance costs are also rising.
