2023 Auto Insurance Market Outlook At-a-Glance

The personal lines insurance market was downgraded from stable to negative by AM Best in 2022. The negative outlook rating was maintained for 2023. A primary reason behind this downgrade was the decline in the personal auto insurance market. Part of being an informed insurance consumer, particularly in the face of rising rates, is understanding what’s happening in the market and how it can affect you.

2022 By the Numbers – Why was the market rated negative in 2022?

A variety of factors contributed to the auto insurance market’s problems in 2022:

1. Inflation – The inflation rate was reported to be 6.5% in December 2022 but peaked at 9.1% in June 2022, according to the Bureau of Labor Statistics.
2. Higher-than-average losses – Private passenger auto liability loss ratios during the first half of 2022 rose 11% from 60.1% to 71.5% year-over-year. Auto physical damage loss ratios rose 16% during the same period.
3. Auto insurance sector’s inability to achieve underwriting profitability in 2022 – Although price increases were passed to consumers, inflation and high losses were too high to find balance.

What Did This Mean for Drivers in 2022?

Market conditions triggered auto premium increases, but insurers were unable to achieve financial stability. According to Insurify, 1 in 5 U.S. drivers reported multiple auto insurance rate increases
throughout 2022, and nearly half experienced at least one rate increase. Auto insurance rates increased for U.S. drivers by an average of 9% in 2022. Compared with the prior year’s data, more drivers are considering switching insurers or dropping their coverage, despite the serious risks of driving without proper auto insurance liability coverage. 

What to Expect in 2023

Unfortunately, industry experts are not optimistic about the personal auto insurance market’s outlook for 2023. The factors affecting the insurance industry in 2022 will continue to drive rate increases
throughout 2023.

Key Factors to Watch in 2023

Ongoing rate increases in the auto insurance industry are predicted to be driven by the following:

1. Rising new and used car prices
2. High rates of motor vehicle accident fatalities and severe injuries
3. Rising medical and litigation costs
4. Increases in costs to repair vehicles
5. High loss cost severity
6. Continued labor market and supply chain struggles

What Can Drivers Expect for 2023?

According to a recent Insurify report, U.S. drivers can expect an average auto insurance premium rate increase of 7% by the end of 2023. On average, drivers will spend $1,895 during 2023 for the same auto coverage they had at the end of 2021.

Contact Us to Learn More

Navigating the complexities of the auto insurance market isn’t something you need to do on your own; that’s why we’re here. Reach out to Wallace Welch & Willingham today to learn more about the market’s struggles, how it can affect your insurance, and cost mitigation strategies that may be right for you. 727.522.7777 | plserviceteam@w3ins.com