Auto Insurance in an Existential Crisis

After many long years of stability, the 125-year-old, $300 billion U.S. auto insurance industry is caught between runaway inflationary cost pressures on one side and consumer wallets, many of which are no longer able to afford the spiraling auto insurance premium increases, on the other.​

In the middle is the $42 billion U.S. collision repair industry (of which $39 billion is paid by insurance), which has been experiencing severe technician shortages, rising labor costs and pricing pressure from carriers as average repair costs have jumped 50% over the past few years.

These increases can be primarily attributed to the cost of replacement parts, scanning and calibration for newer model vehicles, which are now bristling with electronic Advanced Driver Assistance System (ADAS) features and related sensors.

The even higher costs of repairing the rising number of electronic vehicles (EVs) exacerbates the problem. In fact, some carriers are now writing off EVs with just moderate damage as total losses because of their much higher repair costs than like vehicles with internal combustion engines. Total losses, which are costly for insurers, now represent almost 25% of all insured auto claims.