A new study titled "Auto Insurance: The Uncertain Road Ahead," released by the American Property Casualty Insurance Association (APCIA), sheds light on the escalating challenges faced by the insurance industry.
The study revealed that insurance claims inflation is rising at a faster rate than the underlying consumer price index (CPI), resulting in substantial increases in auto insurance losses and combined ratios. This situation is exacerbated by a host of other factors affecting the private passenger auto insurance sector, APCIA said.
“In addition to inflation trends, the private passenger auto insurance sector is also experiencing several other trends such as increased frequency and severity of claims cost, riskier driving behavior by the public, cost increases for medical and hospital services, and outsized growth in lawsuit verdicts and legal system abuses, that are negatively impacting and pressuring the industry with increased losses,” said Robert Passmore, department vice president for APCIA and co-author of the study.
Key data findings from the study include:
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“All indicators suggest elevated auto repair and replacement costs will stretch well into 2023 and potentially beyond,” Passmore said. “Medical inflation is also accelerating. Although insurers continue to monitor the situation closely, as claim costs continue to rise, insurers may be forced to pass these loss costs along to policyholders. Given the trends, insurers are strongly encouraging drivers to minimize their risk by avoiding risky driving behaviors that may result in a loss. Insurers are also advocating for better infrastructure, including reliable supply chains for critical auto parts and safer roads, which should result in fewer accidents and lower claims costs that help keep insurance premiums affordable for consumers.”
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