When the pandemic struck Rhode Island in 2020, and a stay-at-home order was issued, the highways and byways around the state and country became desolate, leading to auto insurance companies doling out rebates, refunds and credits to drivers who weren’t on the road as much.
Now, heading into 2022, mileage is returning to pre-pandemic levels and such rebates are no longer on the table, but COVID-19 continues to play a role and could actually drive premiums higher, according to those involved in the Rhode Island insurance industry.
That’s due to the secondary impacts of the pandemic, including the supply chain crisis and rising inflation, leading to higher costs for car repairs and lengthier car rentals that are reimbursed as part of auto insurance claims, said Bruce Messier, president of the Pawtucket-based Butler and Messier Insurance Inc.
“I think you see a lot more cars sitting in auto body shop parking lots for a longer period of time because they are not even able to get the parts to fix the car,” said Messier, noting that while rental car reimbursement is typically “not a high-ticket item” for insurers, it can inflate the cost of compensation by hundreds of dollars if repairs get delayed.
“Typically, even before the pandemic, you’d see auto rates generally go up 3% to 4% each year,” he said. “Moving forward, it’s going to be interesting because there are so many outside factors now impacting the industry. It’s very hard to predict.”
A spokesperson for the Lincoln-based Amica Mutual Insurance Co. agreed, adding that the costs of labor for vehicle repairs are also rising, which drives up premiums.
“It’s undeniable that there are increases in costs impacting the bottom line, and these pressures are not temporary,” said Brendan Dowding, an Amica spokesperson. “The latest market intelligence trends show that auto rates will rise in 2022.”
‘The big takeaway is that the pandemic is having a real impact on costs.’
FRANK O’BRIEN, Property Casualty Insurers Association of America vice president for state government relations
Insurify, a Cambridge, Mass.-based insurance comparison shopping website, recently released a report stating that American drivers are now paying an average of $1,633 per year for coverage, a figure that’s expected to rise by 5% to more than $1,700 in 2022.
Frank O’Brien, vice president for state government relations for the Property Casualty Insurers Association of America, said that car rental costs are being exacerbated by stalled auto manufacturing, driven by semiconductor chip shortages made worse by the spread of COVID-19 in key regions where the components are produced.
O’Brien said those added rental car costs are hitting especially hard due to high demand in the Ocean State, pointing to a December 2021 report produced by his organization, which cited statistics gathered by Enterprise Rent-A-Car showing that Rhode Island ranked third highest of any state for the length of rental car use during the third quarter of 2021 at 17.6 days on average. The national average for the same period was 15.2 days, according to the report, up about three days from the prior year.
Making matters worse, O’Brien said, is that during the months they were off the road when the pandemic halted the economy, some Rhode Islanders apparently were out of practice. While the number of crashes has not reached pre-pandemic levels, he said, the severity of crashes has increased, resulting in higher costs for car repairs and also hospital care.
O’Brien said he thinks that the open roads in 2020 may have led to some bad habits, giving drivers the wrong impression that they can now “put the hammer down” on the gas pedal.
The National Highway Traffic Safety Administration reported traffic deaths across the country jumped 18.4% in the first six months of 2021 compared with the same time in 2020, a year when an estimated 38,680 people died in motor vehicle traffic crashes throughout the country, the largest number of fatalities since 2007, according to the National Highway Traffic Safety Administration.
“While the overall number of accidents, which in insurance speak is known as ‘frequency,’ is down somewhat, the seriousness of those accidents, which is referred to as ‘severity,’ is up,” O’Brien said. “And the cost to repair the vehicles after those accidents is getting more expensive.”
O’Brien said Rhode Island is already the most expensive state to get a vehicle repaired, and pandemic-related factors will make it worse in 2022.
“I think unfortunately what you’re going to see is some instability,” O’Brien said. “The big takeaway is that the pandemic is having a real impact on costs.”
Part of this problem, O’Brien said, is the influence that the local auto body industry has on Rhode Island legislators, who recently nullified a veto issued by Gov. Daniel J. McKee for legislation that would impose stricter guidelines on insurers to respond to claims for reimbursement.
Dowding, the Amica spokesperson, said his company is “deeply disappointed” in the veto override.
“This legislation could drive up auto repair costs and increase the cost of auto insurance for Rhode Island drivers,” Dowding said.
Marc Larocque is a PBN staff writer. Contact him at Larocque@PBN.com.