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Inflation Is Pushing Car Insurance Prices Higher, With Some Eyeing a 17% Boost

One CEO called his company's returns over the past two quarters 'unacceptable.'
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As if runaway inflation hasn't affected enough already, car insurers are getting in on the fun of raising rates.

The move comes as inflation has increased the price of car repairs, replacements and rentals. The Wall Street Journal reported that insurers on average are raising premiums by 6% to 8%.

The end of pandemic lockdowns saw millions of cars return to the road leading to more crashes and repair costs for insurers. On top of that, inflation is increasing the cost of those repairs. 

As a result, Allstate is raising rates by an average of 7.1% across 25 states, the company said on an earnings call.

"We began increasing auto insurance rates in the third quarter, and this accelerated in the fourth quarter," Allstate CEO Thomas Wilson said.

Kemper Corp.  (KMPR) - Get Free Report said on its earnings call that it filed for an 11% premium increase on more than half of its personal auto insurance business. 

Progressive  (PGR) - Get Free Report is looking to increase rates up to 17% in certain locations, the Journal reported, citing filings reviewed by S&P Global Market Intelligence. 

State regulators control insurance rates, and some double digit increase requests are being reduced to double digits, according to the Journal. 

Insurers Are Victims of Supply Chain Issues Too

Inflation isn't the only headwind auto insurers are facing, with supply chain issues also raising the cost of doing business. 

There is currently a shortage of new vehicles on the road as automakers have not been able to buy the microchips necessary to power their modern fleets. 

That shortage has led to increases in rental car rates and many car policies provide rental car options for policy holders while their cars are under repair. 

Supply chain issues are also causing delays in obtaining replacement parts

Auto Insurers Bottom Lines Under Pressure

Allstate Corp.  (ALL) - Get Free Report reported a 70% decline in net income to $790 million and a 50% decline in adjusted net income to $796 million that was primarily due to lower car insurance underwriting income. 

"The underlying combined ratio for auto insurance was 92.5% for the full year and 100.2% for the fourth quarter of 2021. While that generates good underwriting income for the year and a good economic return, the results of the last two quarters are not acceptable," Wilson said.