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Crashes and costly repairs driving 'Unprecedented' auto insurance increases

Experts say shopping around for insurance is important right now, but rate increases are still hard to steer clear of.

MINNEAPOLIS — If you're a driver who has been cruising along without encountering insurance premium sticker shock recently, experts say you should brace for what could be coming down the road.

"We're seeing an unprecedented number of double-digit rate increases in the auto insurance space," said Julia Dreier, deputy commissioner of insurance for the Minnesota Department of Revenue.

Minnesota drivers with State Farm auto insurance were the latest to encounter those increases. The company told KARE 11 it hiked auto insurance rates in Minnesota by about 10 percent this month.

If you're wondering what's driving it, pick a lane. Speeding and distracted driving have increased since the pandemic, leading to increased frequency and severity of crashes. At the same time, repair costs have soared due to inflation and pricier technology built into vehicles (especially EVs). 

Added together, insurers have been racking up losses for the past few years. State Farm, alone, reported more than $13 Billion in auto insurance underwriting losses in 2022.

"Carriers are paying more out in losses than they are collecting in premiums, that's the base level and so to be able to compensate for that, premiums have to go up," said Aaron Cocking, president and CEO of the Insurance Federation of Minnesota. "No company can exist long term if they, year after year after year are paying out significantly more in claims than they they are collecting in premium."

In light of everything going on, Cocking says it's more important than ever to revisit your policy.

"The best thing that you can always do is to shop around," he said. "And if you really want to find a way to save and you think, 'I'm a great driver and I have no issue, one of the things you can do is reach out to your agent and ask about telematics.'"

He's referring to discount programs like Drive Safe and Save from State Farm, Drivewise from Allstate, and Snapshot from Progressive - to name a few - that collect your driving information through mobile apps or a connected vehicle. But keep in mind, those real-time snapshots of your driving really do factor into your savings.

"The proof is in the pudding on whether or not you are a good driver," Cocking said. "And if you've got no issue with that, then your carrier is able to price you accordingly." 

If you'd rather keep your insurance company out of your car, he said it's still a good idea for everyone to shop around, especially if you have changes to your life or driving situation.

Cocking: "If you're parking in a garage, you want to make sure they know you're parking in a garage, because that also protects in the event we have a hail storm come through like we had a couple weeks ago. 

If you have changed jobs, and your commute is a lot shorter when you applied, you want to communicate that to your agent as well, because all of that information factors in. The insurers are really trying to figure out what risk you pose, for potential losses."

Erdahl: "Do you anticipate this trend continuing? Or is this kind of the ripping the Band-Aid off for the last couple of years and maybe things will even out a little bit?"

Cocking: "I've read some things to suggest that maybe there is some optimism that after we get through 2023 and the early part of 2024 that maybe we'll see this curve start to bend down and flatten out, and so we can hope, but I don't have a crystal ball to be able to tell you for sure."

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