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Auto and Home Insurance Premiums Rise

Insurance Rates Climb as Pre-Pandemic Habits Return

As the economy recovers from the pandemic, the cost of insuring a car or home is increasing. As of the end of April, prices for auto and home insurance had increased 6.1% year-over-year. This was the most significant jump seen since 2018.

Last year, auto insurers lowered premiums. People were driving less because of the pandemic, and there were fewer accidents as a result. As people now return to some of their pre-pandemic habits, from commuting to road tripping, motor vehicle insurance premiums are rising. Analysts at insurance companies are monitoring trends to see whether more price increases are warranted.

Repair Costs Impact Prices

Most insurers are taking a wait-and-see approach to raising premiums further. Part of insurers’ calculations are tied to the cost of repairing or replacing an automobile or home. A number of factors impacting car and home prices are changing rapidly as the economy reopens.

As Progressive (PGR) considered whether to raise premiums further, the firm recently said it is monitoring the speed at which people return to physical offices, the prices of lumber, and shortages in the semiconductor industry. These factors could have a significant impact on the prices of cars or homes.

Challenges Loom for Insurers

Premium increases may not actually lift profits for insurers over the long term for a variety of reasons. For auto insurance, companies are dealing with the fact that as vehicles get more technologically advanced, they are becoming more expensive to repair and replace. On the home insurance side, the Atlantic storm season is expected to be worse than average this year, which could result in increased costs.

Insurance stocks had a strong run during the pandemic as traders sought safe-haven investments. While these stocks are still performing well in 2021, they could face headwinds in the coming months.

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ABOUT Meg Richardson Meg Richardson is a writer specializing in markets, technology, and personal finance. She loves breaking down seemingly complex ideas and making them readable and interesting for everyone. She holds an MFA in writing from Columbia University. When she is not writing about finance, she enjoys running in Central Park and drawing cartoons.

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