Hey guys, Today we’re gonna talk about rates increasing. It’s inevitable, inevitable, inevitable, inevitable. It’s inevitable. Rates aren’t going to go up for car insurance, for house insurance, for insurance, period.
Here’s the real facts behind this. Now, I’m taking a lot of data from a company called III.org, that’s Insurance Information Institute. They do all of the data and analytical type stuff. I read through it and melt my brain so you guys don’t have to think of it. And then I’ll interpret it in my best opinion.
This is my infotainment to you. If you get good advice out of this, the thumbs up helps me the most. If you want more topics like this, Some things that you want to talk about on this site. In the meantime, let’s go right over the facts and just let you know that car insurance you think would go down because what we just had, all of the things happened in the last couple of years and there’s not as many people driving, right?
That’s the case. Not quite. Actually, it’s reversed now. Cost of cars have gone up. Cost of used cars has drastically gone up.
That naturally indicates that the cost of repairs, cost of parts, the rarity of metals, and some of the different things that are happening in other countries are also affecting the cost of insurance in general. It’s the cost to your repair shop, which filters into the cost of the car. But wait, there’s more. So let’s get into some of the actual numbers and the facts on what we’re saying instead of just me just saying they’re all going up and yelling the sky is on fire. Right?
According to this, in 2020, January, the cost of insurance premiums was just over $575. Now that dipped because of when we went into the pandemic. It went straight down because nobody was driving everybody’s work from home. It got below the $500 Mark, which that’s actually pretty decent. I’d like to see that happen again.
But since then, in July of 2020, that has gone back up close to the 550 to 560 Mark. It dipped again because we had another scare. And by the end of that in January 2022, we are actually passing the 575 where it peaked before the previous years. Part of it was because the insurance companies, whether you liked it or not, and you don’t feel that it was fair or not, they gave back $14 billion worth of premiums in assumption that this was going to continue and it didn’t because it turned around fairly quickly. This all happened.
And now that we’re all back on the roads and we’re buying new cars and buying used cars and whatnot the amount of claims has skyrocketed, the actual premiums haven’t skyrocketed, even though that’s what the title says. And that’s really kind of the clickbait type thing. It really has just creeped back to what it was. It actually was this, as we just talked about previously. So those of us that are screaming it’s crazy and unfair.
Some areas are affected more than others, and that’s probably the area that you’re looking at. Let’s talk about accident frequency. But before we do that, if this is your scenario and you are in one of those locations, don’t worry. There are some solutions. The best route to go.
And this sounds crazy, but you got to shop. You got to find the companies that weren’t impacted in your area. Not every company is the same. It’s risk level per company. If State Farm had a low risk and didn’t have a lot of claims, the rate would have stayed the same versus if company B did have a lot of claims, the rate is going to go through the roof.
So the size of the company, the conglomerates of the industry, are the ones that aren’t going to be impacted as much or the ones that are small enough to where they had a good niche and it didn’t impact them either. So it’s really a matter of finding which company is the best fit. If you guys are interested in shopping, like I always say in this site, check with your local agent. If there’s something new that’s changed with them, maybe they have a new company that they’re working with that happens with us all the time. If you’re looking for a really good route, there’s a company that I would recommend that you check out.
It’s called Cover Insurance. I’ll put a link to them below. They essentially shop up to 30 plus companies where you can check your Allstate’s and your progressive and your local companies that are likely going to have a really good fit for you. So if that’s the case, go ahead and click the link below. It’s an app that you download and you fill it out and it just tells you who’s got some of the best rates in your area.
So back to the collision frequency. It’s up 42% from the third quarter of 2021, year over year. That’s a pretty drastic change. Think of this. The industry planned on the pandemic lasting longer, which I’m happy it didn’t.
That dropped. The cost of people not driving was good. There goes $50 to $100 a month in cost or year or whatever the price was for you. Now we have 42% more claims happening, which is just going to increase that. That’s why you’re going to see an additional 5%.
On average, there’s a 26% fatality rate increase. That’s the expensive part for most of these insurers. If somebody gets killed in a claim in an accident and they have to pay $300,000, that’s way more than your 30 or $40,000 car in this scenario, that’s like the worst case for an insurance company. When I say the 26%, that’s from 2019 to 2021. So over the last three years, that’s increase of 26% year over year, the cost to replace a vehicle has gone up as well.
Lots of smart vehicles happening. Lots of details and lots of new tech going on, lots of cool things. I actually like most of that stuff, but that’s causing a 13% increase in the cars. So we’re seeing the increase in that, which is also increasing the cost of repairs. It’s also increasing the actual replacement cost if a vehicle was totaled.
So even though we’re seeing a 26% increase in fatalities, we’re seeing a 13% increase in the cost of the vehicle. And the 46% increase of claims were not seen as big of an increase in premiums. Part of that is because once again, an insurance company is a company. They’re there to make money. They are investing their funds correctly, and they may have to jump up those rates slightly to overcome that loss of income.
They usually have the funds available, but this is where we could see some of those companies that aren’t handling it correctly or they’re losing in the market. They could fold completely. So some companies could just disappear like you’re seeing in Florida, where other companies are thriving. They’re actually still doing well and their profit margin might be a little bit less, but there’s still a profit on the home side. It’s a completely different story.
It’s just cost of materials. There’s not a whole lot to that. Cars are moving, they’re always going and flowing. And that’s the case for cars. Homes naturally increase in value, partially because of the cost.
It follows the inflation of the US. If the inflation goes up, the cost to build the house or that wood or that brick or that nail is 3% to 5% in addition. So seeing your house creep up 3% every year is pretty common. Eventually what you do is you get sick of it. You’re like, oh, these premiums went crazy and you shop around to find that there was a better deal.
And it honestly wasn’t that there was a better deal at the time. The deal was probably always there. It’s just that the rate that the increase is happening is probably unlikely with most companies. How much does medical cost if you get injured and you broke your arm might have been $5,000.10 years ago. It’s probably $15,000 today, partially because of the labor, partially because of the materials, partially because of the new technology.
So they’re constantly evolving parts of the world. And that’s really the main reason that you’re going to see these rates go up and up and up over time. The job of the insurance companies and the government mixed in to regulate that is to try to keep them to a manageable amount. That’s not to say that I don’t disagree with those of you that leave the comment and I appreciate the comments, so go ahead and still put it there. But if you’re paying ridiculous amounts, I’m okay.
Like, I get it. There are some areas of the US that are just ungodly expensive. Let me know what your guy’s thoughts are below. I’d be curious to see if you feel that you agree with this article and the statistics. This is what is coming from the III which I completely trust.
They’ve got some of the best data out there. But if you are still looking for a better rate I’m going to have you guys watch my next video which is how to shop for insurance on your phone. It’s one of the best ways to get the best rates. If you’re curious on what kind of rates you can get go ahead and check that out before you do anything otherwise I’m Mark with think insurance. I’ll see you at the next one.