A return to pre-COVID-19 pandemic travel on U.S. roads and the increasing costs of repairs and replacements is about to trickle down to automobile insurance companies.
And then to insured drivers.
The U.S. Auto Insurance Market Report, an annual report by S&P Global Intelligence, predicts that insurance companies will address the rising costs of claims and narrowing profit margins. The report was published by S&P’s Financial Institutions Group (FIG) Research team.
“Auto insurers provided estimated premium relief of as much as $16.4 billion to their customers in 2020 as Covid-19 curtailed commuting and leisure travel,” Tim Zawacki, principal analyst for FIG at S&P Global Market Intelligence, says in a statement from the company. “In 2022, some of those customers may face higher auto insurance rates as carriers respond to a return to normal driving patterns and claims costs continue to climb.”
The report confirms “the unprecedented effects of Covid-19 on the personal and commercial auto insurance business.” Automobile crashes are returning to pre-pandemic levels as Americans return to driving while the average cost to settle claims is rising because the costs for automobile bodywork and used cars are rapidly increasing.
S&P’s statement about the report highlights the greater use of technology favoring “more stable and predictable auto insurance results over the long term.” The benefits of technology for the industry will include increased consumer and trucker acceptance of telematics and more development of advanced safety equipment.
Property and casualty underwriting profitability, according to the report, will normalize for personal and commercial auto insurance businesses in 2021 because of inflationary pressures and continued increase of vehicles back on the road.
The good news is that the report states supply chain disruptions will ease over time and therefore lessen inflation.
Some auto insurance companies, however, will raise insurance rates to offset the claims trends. The report predicts growth for personal auto direct premiums of 3.1% in 2021 and 5.4% in 2022. Commercial auto premiums will rise 14.2% in 2021 and slow down to 8.4% in 2022.
