How Losses are Driving Auto Insurance Premiums Higher and Higher — And What Agents Can Do About It

by Bluefire Editor - November 20, 2023
Sad woman holding her head with insurance bill on table

As an auto insurance agent, you’ve probably been inundated with complaints from prospects and existing clients about the high cost of premiums. You may wonder how best to communicate the reasons behind these increases to your clients while retaining your book of business. 

In this article, you’ll take a deep dive into the difficulties that insurers face in late 2023 around soaring auto premium costs — and how you can navigate these murky waters and price hikes with your client base. 

What’s Causing Double-Digit Increase in Average Car Insurance Premiums? 

Depending on the state, auto insurance premiums have climbed as much as 88% year-over-year from 2022 to 2023. In an in-depth report from the Washington Post, reporters interviewed several major insurers as well as drivers. Some of the most significant factors driving these price spikes include: 

  • Increased Disaster-Related and Catastrophic Claims: Due to the increasing prevalence of natural disasters, catastrophic events, and their resulting claims, insurers are facing losses. To cover this increased claims burden and to offset insurance losses, insurers are forced to raise premiums to compensate. 
  • Higher Vehicle Repair Costs: Both parts and labor have become more expensive since the start of the COVID-19 pandemic. Additionally, diagnostic costs have increased due to the increasing complexity of the internal computer systems that allow modern vehicles to function. 
  • Lack of Regulatory Pushback: Most state regulators have approved these premium increases because insurers have demonstrated these increased costs. It is unclear whether regulators will continue to permit further increases, but as long as the economic situation remains shaky for underwriters, it can be expected that regulators will continue to acquiesce. 

Of course, prospects and clients will be less understanding of these problems. To address these concerns, there are a few approaches you should consider taking. 

Smiling insurance agent helps young couple navigate through insurance bill

What Questions Will Prospects and Clients Likely Ask? 

Both prospects and clients will want to know why their quotes and renewal premiums, respectively, are so high. They may ask you the following types of questions. In quotation marks, you’ll see an answer that might make sense depending on the circumstances: 

Client: If the cost is so high, why should I even bother with an auto policy at all? 

Agent: “I completely understand that this higher cost is a challenge, especially given everything else happening in the economy right now. But remember, it is illegal to drive without adequate liability coverage. If you don’t have a state-required level of coverage, you could lose your license or even go to jail.” 

Client: Will you raise my coverage premiums at renewal time? 

Agent: “Ultimately, the underwriter makes this call. I can’t necessarily control what will happen with the market in the future. It all depends on several factors, including whether supply chain challenges in the auto repair market are resolved and if there is a decrease in losses. If those things happen, you could expect your premiums to remain relatively stable when you renew. I’ll also keep a sharp eye out for discounts you qualify for.” 

Client: What else can a good auto insurance policy provide for me? 

Agent: “Aside from peace of mind, you can also add additional value to your policy by including protection against uninsured motorists, and comprehensive coverage to provide coverage against theft or vandalism, a problem that has been increasing in recent years after the pandemic.” 

When Will Premiums Stabilize, If Ever? 

The only real way premiums will stabilize or fall over the long run is if insurers can begin to recoup their losses with stronger underwriting performance and a resolution to the supply chain issues affecting the entire automotive industry. Until that happens, don’t expect much to change on the premium cost side of insurance trends. Insurance agents will need to stay vigilant in retaining clients for the long haul. 

Your Auto Insurance Partner During Tough Underwriting Times 

As an independent auto insurance agent, you want a partner you can depend upon, even in a tough insurance environment. Get in touch with Bluefire Insurance today by calling (866) 424-9511 or visiting us online

Customer Service866-424-9511