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Due to the rise of employment and low-cost gasoline prices, there are more Americans driving now. As a result, more people are getting into accidents, which forces insurance companies to pay out unusual sums in claims. Accidents are mainly caused drivers being distracted by their smartphones or not wearing seat belts. Nowadays, repairing automobiles are very expensive since they’re loaded with sensors and devices.

Greater Amount of Casualties

Despite leading the electoral vote by a great majority, Trump’s triumph brought light to some constituents throughout the nation. Although many Americans did not vote for him, Trump’s victory was a result of the proportion of the votes that his most zealous followers accounted for. Nevertheless, his success in the presidential election evoked panic and frustration among Americans. They are upset because of Trump’s recent actions such as the travel ban. As a result, the frequency and severity of accidents increased, which caused insurance rates to go up as well.

According to Chris Goetcheus, an agency spokesperson, disturbed driving is one of the main causes of accidents. Goetcheus emphasizes that since people became very distracted, we have no option but to seek out recent changes and find some correlations. In addition, he also mentions to the Boston Globe that people started to become more troubled ever since Donald Trump came to power. Thus, a typical windshield replacement has gone up in cost from about $350 to $700.

In Massachusetts, top insurers have obtained authorization from state regulators to increase the average of their rates between 3 and 6 percent this year. Industry officials mentioned that some drivers are even likely to see higher increases and the growth of rates will probably affect all the customers of automobile companies. This is the second year of consistent increase. Rates in 2016 jumped on average between 6 to 9 percent.  Based on the Insurance Research Council, the average cost per paid injury liability claim went up by 32 percent, from $11,738 to $15,506 between 2005 through 2013. In 2014, the case reached $16,600, 7 percent more over the 2013 average payout.

Companies that are Affected

Anything that provokes panic can lead to the growth of prices and the living costs for ordinary Americans. Trump’s rise to power generated deep concern within many businesses and consumers. Businesses are now investing less money in advertising and marketing to keep more money aside for crisis. On the other hand, consumers are making fewer expensive purchases like exotic sports cars that would cost a lot to insure. Less costly sports cars on the road means greater insurance premiums for us since insurance companies lose the money from those delightful customers.

In 2015, the amount of claims was so great that 14 of the 20 largest insurers saw their loss ratios go up from 2014. According to the top 10 auto insurance companies, only GEICO, Progressive and Travelers had combined loss ratios of fewer than 100 percent. This means that policyholder premiums were enough to cover claim payouts and other expenses.

 

Rank

Largest Auto Insurance Companies Combined Loss Ratio 
1 State Farm 112%
2 GEICO 98%
3 Allstate 101%
4 Progressive 94%
5 USAA 103%
6 Farmers 109%
7 Liberty Mutual 104%
8 Nationwide 110%
9 American Family Insurance 106%
10 Travelers 97%

Source: SNL Financial

 

Hardly any of the major auto companies were profitable on their insurance premium revenue in 2015. As a result, these companies had to depend on other types of businesses or investments. Large insurance corporations invested their profits in bond markets for a fixed income. Limited to a few options, auto insurance companies had no choice but to increase rates for the next year or two. In Georgia, Allstate submitted an appeal to boost rates by 25 % by May 22, 2017.  Based on Ratefillings.com, there was an average increase of rates by 5.9% in 2015 and in the first quarter of 2016 rates have already gone up by 2.2%.  Nevertheless, GEICO has raised rates at least once in the past year in every state except for California and Wyoming.

 

The President’s Policy on Trade & Transportation

Trump’s actions towards international trade will have long term impact on car insurance. He has been greatly concerned with trade and withdrew from the Trans-Pacific Partnership (TPP). The TPP was a trade agreement among the US and 11 other countries around the border of the Pacific Ocean. This was a crucial deal signed by President Obama, which removed numerous trade barriers and tariffs to reduce the cost of imports and consolidate regulations respecting goods and services. Nonetheless, getting hold of foreign cars and automobile parts are more difficult since there are now restrictions in resources coming from overseas.

Trump wants contractors to manufacture automobiles in the US. As a result, he condemned automakers for building cars in other regions such as Mexico. Although this will enable corporations to double their production capacity, they will be crippled to some extent in the future. For example, the slowing of auto sales is leaving numerous corporations afraid to open up new facilities. This means fewer vehicles on the road with greater expensive insurance policies.

A Look into the Future

Based on Trump’s recent actions, the situation of other insurances does not look so great.  After Trump became president, his cabinet suspended a pending rate cut for mortgage insurance needed for FHA backed loans. FHA backed loans are used by first-time home buyers and people with bad credit. Hence, potential buyers are unable to obtain the insurance they need to purchase new property. Trump prevented numerous property investors from possibly cutting their premiums by hundreds of dollars a year.  Moreover, this can lead to a rise in the cost of loans and slow-down in the property market. If Trump is able to impact the prices we pay for home insurance in such a negative way, then there is no shock if he makes similar reforms to the auto-insurance industry.

Trump’s presidency may lead to inflation throughout the year 2017. Greater inflation indicates that there will be higher rates for insurance and everything else. Inflation will make the US dollar becomes worth less than it was before and you need more money in order to afford the exact amount of coverage. Therefore, we will spend less on expensive vehicles or comprehensive plans if we pay more for insurance than anything else. This will push the automobile industry to react by increasing prices even more.

The new president’s policies have impacted the auto insurance industry in many ways. The political and economic consequences of Trump’s presidency have lead to an increase in accidents and prices. Nevertheless, Trump is also making some positive changes for business but it’s too early to figure out what he has in mind. So far, all we know is that there is a fine correlation between Trump’s behavior and the increased cost of our car insurance. This trend is more likely to advance rather than decline.