Why Auto Rates Appear To Be Rising

As a member of the Arbella Insurance Group, Bearingstar Insurance has the opportunity to provide you great coverage from a local carrier. It also allows us utilize their experience when it comes to keeping you informed on industry trends.

We recently spoke with Erin Schaaf, Arbella’s assistant vice president of Personal Lines Product, about rising auto rates and its impact on Arbella customers. Here is what we asked her:

• Q: What is going on with auto pricing right now?
• A: The auto insurance industry is in the midst of a fundamental shift nationwide. Driven by higher accident rates and rapidly evolving technology, carriers are facing challenges, never faced before and the way they look at pricing is more complex than ever.
• Q: What are the most common factors leading to auto insurance increases?
• A: There are many factors that that impact pricing, but here are three of the most common:
  Distracted Drivers and Pedestrians:
  Distracted driving has surpassed drunk driving as the number one cause of car accidents. Furthermore, the increased lack of skid marks at accident scenes indicates drivers aren’t paying attention and crashes have become more severe. Pedestrian deaths and bicycle accidents have dramatically increased.
  More Cars on the Road:
  With a stronger economy, there are simply more cars on the road, more miles being driven, and more hazards out there. Accident frequency in 2016 increased by a staggering 14% over 2014. More road construction has created additional hazards. And families with inexperienced operators are more likely to buy that extra vehicle for kids to drive.
  Cost of Repairs is Skyrocketing:
  Vehicles are becoming increasingly more complex due to technology advances, resulting in more expensive parts. The cost of repair has gone through the roof.

It’s important to note that these increases are not unique to New England, in fact according to MarketScout , for the second straight quarter, the U.S. composite rate for all personal lines increased 2.5% and auto rates specifically by 4%. Identifying and understanding why rates are increasing is one piece of the puzzle, the other is to check in on how the insurance industry is handling and reacting to these changes. To that end, we also spoke with Joe Salerno, Arbella’s vice president of Claim, to get his insight on rising repair costs and what Arbella is doing to contain them.

An Industry Misconception:
One of the biggest misconceptions in the auto insurance industry currently is advanced safety features dramatically limit the number of accidents. For example, vehicles with lane assist, lane departure, and adaptive cruise control are designed to decrease the number of accidents, but there simply aren’t enough of these vehicles on the road yet to favorably impact the frequency of accidents; particularly when you consider the impact of distracted driving.

Real World Statistics:
Not only are safety advancements, aluminum bodies, and Advanced Driver Assistance Systems (ADAS) NOT reducing accident rates, they are driving repair costs up significantly. Take vehicles with aluminum frames or bodies, for example. While they get better mileage, aluminum is a softer material than steel and tears more easily. Further, there are far fewer certified body shop technicians who can repair them. For example, in 2016 there were only two shops in Massachusetts that were certified to repair current year Audi A8 vehicles. Here are a few more statistics on rising repair costs:

• By 2019, 10% of vehicles on the roads will have ADAS sensors. By 2025 that will be 40%
• The cost to replace a windshield with ADAS can be as much as 82% higher
• Windshield replacement sensor re-calibration alone can cost $1,000 or more
• Hourly labor rates for newer vehicles can be 200-300% more

Minimizing the Impact on Customers:
As you can see, repair costs are rising and not likely to be declining anytime soon. The good news, however, is that Arbella continually leverages different loss cost management strategies to minimize the impact on our customers. Our highly trained and experienced team stays on top of industry trends and works fairly and effectively with over 1,700 repair shops.

As Joe Salerno puts it, “Most importantly, though, is that we will never try to control costs at the expense of customer safety. That has been, and continues to be, our top priority. Arbella remains well positioned to respond to customer needs and continuing to deliver the exceptional service levels we always have.”

You can count on Bearingstar to highlight insurance industry news that could affect you and your family. Working with Bearingstar and your local agent you can rest assured that we are taking active steps to monitor industry trends and continue to provide the right coverage to keep you and your family safe. From answering your questions to guiding you through the entire insurance process, Bearingstar will always be here for you. Contact us at one of our locations across Massachusetts and Connecticut to review your existing policy, or to get a quote.

¹ Zanona, M. (2017). Drivers Log Record-Breaking Miles on US Roads in 2016. The Hill.
² Fernandes, D. (2017). Here’s Why Your Car Insurance Might Be Skyrocketing. Boston Globe