J.D. Power's Mark Garrett discusses rising auto insurance premiums

Auto technology has made vehicles safer and could reduce the number of accidents in the long run. However, technology like lane assist, back-up cameras and semi-autonomous features are increasing the replacement costs when vehicles are involved in an accident.

In the latest Transformation Forum, Mark Garrett, director for the insurance intelligence practice at J.D. Power, shares some insights on the factors that have been driving auto insurance rates over the past several years.

Before the pandemic, auto insurance rates rose an average of 3-5% per year and during the pandemic, costs and the number of accidents dropped. However, accident severity rose as speeds on empty highways increased and now two years after the pandemic, Garrett says he’s seeing increases in accidents, severity and costs, which are driving claims costs higher. “I’d say the last two or so years following the pandemic, we saw double digit increases in just the loss ratios. What insurers are actually paying out for those claims went from the mid-fifties up to the mid- sixties, then up to the mid-seventies, and it’s kind of just staying around there right now.”

Garrett also shares how supply chain issues affected repairs, new cars and policy pricing across the board. Labor and parts availability, in particular, increased the amount of repair time following an accident, and even drivers who wanted to have regular maintenance done to their vehicles were impacted.

“So, what’s interesting is where we’ve seen these prices really have an impact on the claims, but also from the supply chain, we’re still seeing shop backlogs really be a big issue. So, you think if you can’t get the parts, cars are sitting around these shops longer, these shops are at capacity, they’re not getting new vehicles in. I mean I was just looking at this last year where we saw it, it peaked at almost six full weeks to get your car into the shop, and this is Q1 of last year and there’s always a spike in this at Q1,” said Garrett.

He also discusses the rising popularity of electric vehicles and their impact on auto insurance, how policyholders are adjusting to a more automated insurance process and interacting with tech for everything from purchasing coverage to filing claims.

You can watch the full interview here.