Major global supply chain issues and delayed shipments are not the only issues driving up the cost of car parts, repairs, and repair times. The aftermath of a global lockdown from the Covid pandemic greatly impacted car repairs, car insurance claims, and auto insurance rates like never before.
When the pandemic hit, many industries halted purchases and production to match lower demand, including car part manufacturers. Computer chips, needed for everything from entertainment systems to power steering, are one example of the existing supply chain deficits. As car parts needed for new cars and repairs became increasingly scarce, the demand has also increased, which left car repair shops with a backlog of work.
On top of the challenges with the supply chain, auto repair businesses have not escaped the national labor shortage. While insurers were able to stay active with remote work plans and automation, the car repair industry needed skilled technicians on site. In addition, there were fewer drivers on the road resulting in fewer repairs needed during the lockdown. Like many service industries, the talent pool shifted and has not completely rebounded. The number of new technicians entering the industry has also declined due to inadequate compensation and there is also a turnover rate of around 40%.
Pandemic restrictions reduced traffic volume on roadways, leading to higher speeds, more serious accidents, and higher than average claim severity. While the National Highway Traffic Safety Administration's (NHTSA) new first quarter 2022 data shows that the number of U.S. highway deaths increased by seven percent overall, increases in Virginia were over 70%.
The number of traffic-related crash incidents increased to about 4% in 2023 compared to 2022, and about half of the resulting fatalities were attributed to speed. There were 25,274 speed-related crashes in Virginia in 2023, making it one of the leading causes of accidents in the state.
The shortage of chips and other car parts, as well as the increased value of a car resulted in inflated car insurance claims. A car bumper that used to sell for $500 is now $800, lowering the economic threshold for qualifying a vehicle as totaled vs. worth repairing. The Consumer Price Index (CPI) rose more than 7 percent compared to 2020 – the biggest increase in nearly 40 years. At this rate of inflation, we are buying the same goods and services for 7% more than we were a years ago.
Prices for used vehicles jumped more than 27% in 2021, according to the auto industry analysts at Edmunds. Even though prices have come down over the last two years, they are still about 33% higher than at the end of 2019. More expensive claims lead to car insurance premium hikes for everyone.
While all of these costs raise everyone's insurance costs, there are things you can do to keep your individual car insurance rates down as much as possible. Be careful with shopping for cheap car insurance- you know the saying: you often get what you pay for. There are plenty of ways to save money on car insurance without compromising your coverage.
If there's a good time to drive carefully, it's now. Distractions, tailgating, and speeding are among the most common causes of car accidents. Wear a seatbelt, put your phone away, and stay alert. Did you know Virginia now has a hands-free driving law? Leave plenty of distance between you and the driver in front of you and keep your speed down. The latter will also save you money on the ridiculous gas prices we're also experiencing right now!
With car repair timelines slowing by the lack of available parts and qualified workers, the time needed for a rental replacement car has increased, leaving consumers with inadequate rental car coverage limits in a claim situation. If you have rental car coverage, be aware of your limits and speak with your local agent about adjustments. Be prepared for additional out-of-pocket costs to extend the use of a rental car.
The higher price for parts is also driving up the price of used and new cars, making it difficult for consumers to replace a totaled vehicle. The used car market prices are up 30% or more compared with the same time last year. Selections are slim in the new car market. If your car is totaled by your car insurance carrier, you may opt to pay for the additional cost of repairing your car out of your own pocket rather than pay a ridiculously inflated amount for a new or used car.
One of the best ways to avoid mishaps on the road and the potential for a car crash is to keep up with your car's essential maintenance. Have your brakes checked, do regular oil changes, and replace fluids and spark plugs when needed. Keep your tires properly inflated and replace them when needed. Maintenance issues on the road can lead to safety issues and accidents that can otherwise be avoided.
Learn more about car insurance in Virginia
Sources:
https://www.dmv.virginia.gov/sites/default/files/documents/VA-traffic-crash-2023.pdf
THE NORTHERN NECK INSURANCE INTEGRITY PROMISE — We pledge to provide straight talk and good counsel from our NNINS Virginia insurance experts through our blog. While we hope you find this to be a helpful source of information, it does not replace the guidance of a licensed insurance professional, nor does it modify the terms of your Northern Neck Insurance policy in any way. All insurance products are governed by the terms in the applicable insurance policy.