Consumers have begun paying higher prices for another necessity. Car insurers are raising rates quickly, the Wall Street Journal reports—by 6% and up. Allstate, for instance, is increasing its rates an average of 7.1% in 25 states, and it's not finished yet. "We are continuing to go at a very fast pace across other states and even in some cases, the same states again, with rate increases as we get new data and new trends," an executive said. After some consumers had modest reductions in their rates during the pandemic, companies now say they might raise prices a couple of times this year in some states.
Insurance companies can point to several reasons to raise rates. Auto traffic is just about back to where it was before the pandemic, and accidents have increased along with it. Many policies provide a rental car when the insured vehicle has been in an accident, and rentals cost more now, partly because used car prices are up because the semiconductor shortage has slashed the supply of new cars. Repair shops hold onto cars longer while they wait for parts, and parts are more expensive. Government data back up the point that speeding and distracted driving have increased, leading to more accidents. And insurers say they're trying to stay ahead of inflation generally.
But some consumer advocates are fighting the increases, pointing out the huge profits earlier in the pandemic when people were staying off the road. "Insurers drag their feet" to cut rates at such times but "fall all over themselves in their rush to raise rates as quickly as possible" when the situation changes, said an official at the Consumer Federation of America. Analysts said state regulators have cut some of the rate increases that were in double digits to single digits, per the Journal. An official with the National Association of Insurance Commissioners said regulators will review insurers' financial situation during 2020 and 20201, including the rate reductions and refunds during the slowdown. (More insurance stories.)
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