Car Insurance Rates Increasing Due to Severe Claims: A Closer Look
Car insurance rates have been on the rise in recent years, with many attributing it to corporate greed. However, a recent study by LexisNexis Risk Solutions has shed light on another significant factor contributing to the increase in premiums: the severity of insurance claims.
## Rising Costs in Insurance Claims
According to the study, since 2020, claims for bodily injury have increased in severity by 20 percent, while material damages coverage has seen a 47 percent increase. This rise in severity can be attributed to various factors such as parts and labor shortages, as well as increases in the costs of medical care.
The more severe accidents have raised concerns about whether minimum coverage limits are adequate to cover the increased costs. Currently, 43 states plus Washington, D.C., require $25,000 or less in coverage, with four states having $30,000 minimum coverage limits and three others setting it at $50,000, which barely covers the average new vehicle price in the United States.
## Increase in Total Loss Claims
Total loss claims have increased by 29 percent since 2020, with over a quarter of collisions resulting in totaled vehicles in 2023. These claims are not only more expensive for insurers but can also be customer service headaches for drivers. A significant number of surveyed individuals expressed dissatisfaction with the experience following a total-loss accident, with 40 percent stating that it took a month or longer to receive payment for their claim.
## Legal Help Impacting Claim Severity
Another contributing factor to the severity of claims is the increasing number of people seeking legal assistance post-accident. The study found that 85 percent of respondents were approached by an attorney after an accident, with around 60 percent contacted by two or more lawyers. More than half of those who obtained legal help received higher settlements, pointing towards the growing influence of legal support in insurance claims.
In conclusion, while rising car insurance rates may often be seen as the result of corporate greed, it is essential to consider the increasing severity of insurance claims as a significant contributing factor. Particular attention needs to be given to the adequacy of minimum coverage limits and the impact of legal assistance on claim outcomes.