Auto Premiums Still Rising

Auto insurance premiums have jumped significantly, and that trend will continue.  For probably quite awhile.  And probably in large numbers.

The insurance industry has credible evidence to support an increase in premiums.  The biggest impact is that cars are so much more expensive to repair these days.  It’s the gadgetry, most of which is meant to keep us safer.  Just like crumple zones many years ago helped keep passengers safe, innovations in technology that help to reduce the frequency and severity of passenger injuries are pricey to fix.

Many cars these days have automated systems that sense traffic around them and can drive, stop, and change lanes without driver input.  But when those sensors are damaged in an accident, the liability for correctly replacing and reprogramming those systems are extremely high because so much depends on getting it done right.  And when there’s liability for doing it wrong, there are high costs associated (mainly to buy insurance for the inevitable lawsuit down the road).

We had a client with front-bumper damage to a Tesla which in the “old days” (2 years ago) probably would’ve cost about $10,000 to fix, but they had the entire $95,000 car totaled because the sensor that read for forward obstacles was damaged and no one would/could repair it.  And since the whole concept of insurance is that neighbors pay for their peers’ losses, all insurance premiums have increased substantially to account for these realities.

This feels especially acute because of the rapid rise in consumer acceptance of this technology.  This hasn’t been a slow boil, but a rapid social change and it’s likely here to stay.  Even as driverless cars begin to enter the market, there will be accidents, and we’ll see auto premiums for those who drive their own cars have to respond.  If there are fewer car owners, there will be fewer people to whom the risk can be spread, leaving the supply of insurance-loss funders (policyholders) in shorter supply.  This will mean even higher premiums.

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