Auto insurance premiums are on the rise due to several factors.
1. More miles driven by the typical customer.
2. Legalized marijuana (in some States). In Colorado, Nevada, Oregon and Washington, where recreational marijuana is legal, collision claims frequency is about 6% higher, according to 2018 research from the Insurance Institute for Highway Safety and the Highway Loss Data Institute.
3. Distracted driving. Although eating and drinking, talking to a fellow passenger, applying makeup, programming a GPS or navigation system, or simply adjusting the radio all qualify as distracted driving, using a cellphone is undoubtedly the biggest concern: According to a study conducted by Cambridge Metrics Telematics last year, phone distraction occurred in 52% of trips that resulted in a crash.
4. Higher speeds. Consider a highway with a speed limit of 70 mph that used to be only 55 mph. “Most people are driving about 75-80 mph, and if you do the math on that, that means you’re driving 40% faster.
5. Increasing repair costs. Safer cars themselves are responsible for the final factor. Claims that used to be $3-4,000 are now $10-12,000. Minor fender benders are causing significant damage dollar-wise to multiple vehicles. Consider this: Whereas a Boeing 787 has 7 million lines of code and Facebook has 60 million lines of code, a 2016 Ford F150 has 150 million lines of code. Whenever you have an accident, you have to scan all the electronics before and afterwards, and all those costs keep increasing.
Increasing claims severity is a persistent auto insurance pattern that III has tracked going back 50 years. Whereas accident frequency goes down about half a percent a year on average the long-term trend for the cost of a claim is to go up considerably faster than the rate of inflation.
Better buckle up as this is probably going to be the new reality, at least until self driving cars are a reality!