Cars and houses are big-ticket items on their own, and they’ve gotten much less affordable over the past few years due to a variety of contributing factors, including supply not keeping up with demand, manufacturing delays due to the pandemic, and supply chain slowdowns.
But that’s not the only place people are feeling the financial pinch.
Costs associated with vehicles and homes have gone up, too – things not factored into the sticker price, like fuel, property taxes and parts. And let’s not forget insurance, which has gotten significantly more expensive in the past year, for both home and auto coverage, according to the Texas Department of Insurance.
Mitchell Schnurman, business columnist for the Dallas Morning News, spoke with the Standard about what’s behind the rise in costs.
This transcript has been edited lightly for clarity:
Texas Standard: Let’s take a look at the data here. What kind of increase in rates are we seeing? And maybe you can give us some sense of comparison to previous years.
Mitchell Schnurman: Well, I’m telling you, this is sticker shock to the nth degree. The average statewide auto insurance rates are up nearly 24%. This is practically unprecedented. So to give you an idea, that’s eight times higher than it was last year, the previous year in 2021. And it’s also far above the average of about 3% to 4% a year over the previous decade. The TDI told me – that’s the Texas Department of Insurance – this is the highest increase in at least 20 years. And that’s just because that’s the data they have readily available.
There’s a good bet that we haven’t seen anything quite like this, because if you’re having 24% increases, those can be pretty intolerable. And then when you look at, you know, you look at some of the insurers, the numbers are even larger. So if you take GEICO, which is one of the leading auto insurers, their average rates were 54%. Allstate, another top provider, 38%, and Farmers 32%. So that’s just to give you a little bit of a picture of what’s going on.
Yeah, and it’s a pretty scary picture, too, Mitchell. Let’s back up a bit: Is Texas alone in seeing these enormous hikes?
It’s a little difficult to tell. And I say that because I’ve asked that question, but it’s hard to get fair comparisons. The insurance industry can be opaque in part because there are so many providers. And it isn’t just that there’s Allstate. Allstate has multiple lines that they offer here, and so do some of these other companies. So when I asked experts on that, they sort of beg off on the question. But I do think you can look at some other states that have filed regulatory filings connected with this, such as North Carolina. North Carolina, they have a process of a much closer review. And in that state, auto insurers are seeking a 28% increase. But you have to realize they’re not likely to get that, okay? Their regulators are likely to turn around and slash that.
Do we have a regulatory construct that’s similar? Is there a way that the Texas Department of Insurance can come in and cap these increases?
Well, they can come in and they can disapprove it, but they tend not to. This is kind of a philosophy and an operating – this is really a feature of the Texas system, is we sort of believe that buyers ought to take care of this. If we can attract a lot of companies, the idea is it’s up to you as a consumer to shop around. Market forces, that’s a good way to put it. So I’ll give you an idea: So in Texas, we had I think it was almost 2,600 rate filings in 2022. The Texas Department of Insurance on their website said no filings were disapproved.
You know, that’s pretty stunning. But as you’re talking, I was thinking, why would this be happening right now? And I know that we’ve seen, you know, enormous increases in the price of automobiles and homes. Of course, if you’re talking about insuring those items, that presumably has to be covered one way or another. And I would presume that that’s what the insurance companies are saying about these apparently unprecedented rate increases.
You’re right. There are several elements that play into it. One of it is the higher values of cars, and used cars in particular – they really shot up during the pandemic. But the claims are also up a lot. You’ve probably heard people talk about how we got out of practice when we were down in lockdowns, as far as driving goes. And sure enough, when driving resumed, the number of accidents and the severity of accidents has really been a lot higher. If you look at fatalities, I think they were up 18%. So most of the measures that you can see, it looks like people are just having a lot more accidents and they are more severe.
Then you got to throw in another element, and that’s just general inflation. So the replacement parts, I mean, they were up 50% in 2021. So the supply chain issues affected car repairs or home repairs in the same fashion. Also, labor shortages. So you add all that up, it’s a lot more expensive to fix cars. The cars are worth a lot more. All that together, you know, adds up to a big increase.
You mentioned the regulatory philosophy of Texas state regulators, but if they get a lot of blowback on this, I wonder whether that philosophy is going to hold. And for that matter, I wonder if there’s anything else that consumers can do to save on insurance. I rather think that a lot of people are going to be looking to trim back to their coverage terms now.
Yeah. So there’s two questions. The first one about whether the politicians will get involved and try to force regulators to be stricter: That would be surprising. So it’s going to be up to the consumer.
Now, there are things consumers can do, and TDI even has a website on five ways to shop around that’s worth looking at. But everybody suggests the same stuff. It starts with shopping. There are dozens of offers, so you need to shop around a lot. You need to review your coverage. It’s possible you’re driving less after the pandemic and that can lower your rates. And then one of the most common things is to raise your deductible. The problem with that: You got to be able to have the money to handle it if you have a claim. So that’s a trade-off in there.
Finally, there’s a lot of discounts. So the most common one is the bundling discount. If you and your spouse or other people in your family go with the same company, or if you combine homeowners along with auto, there are often discounts. There’s student discounts, military discounts. Finally, if you really want to, you can take a defensive driving class. And a lot of companies will give you a discount for that.