As I’m sure you’re aware, costs are rising across all industries and labor shortages are accompanying them. Because of this, the rising repair costs and labor shortages are raising claim costs for auto insurers up to nearly 5% as of last March. This is more than double the average of 2.3% last seen in 2016-2019.
The labor shortage is having a significant impact on the collision industry as well. TechForce Foundation projects the industry will see a shortage of roughly 20,000 technicians per year through the year 2030.
Because of this, shops are increasing wages to attract potential. With the increase in wages, the labor cost is passed directly into increased labor rates for shops. Many of them are reporting rate increasing of 6%-9%. Auto insurance is being impacted even harder by rising rental car rates and longer average repair times from the labor shortage.
The American Property Casualty Insurance Association (APCIA) has also reported “the return of higher frequency coupled with significantly higher auto repair and replacement costs has heavily impacted auto insurance costs.”
On top of this, the prices of vehicles has also been on the rise. New vehicles rose 11.8% in 2021 – an increase so large it hasn’t been seen since 1975, says the APCIA. Used vehicles on the other hand have skyrocketed to a record of 37.3%.
Because of these issues, it is apparent that we will continue to see raising rates among the auto insurance industry as well as many other insurance industries.