Historic inflation trends. A lack of skilled workers. No cars on the lot. These trends and others are driving up costs related to the repair and replacement of homes and vehicles, which in turn is causing insurance companies to increase home and auto premiums.
In the first year of the pandemic, lumber prices alone jumped 42%. Steel mill products rose a staggering 81% in the first three quarters of 2021.
The higher costs of materials leads to more expensive bids on home repairs and new construction. To make matters worse, the home-building industry is facing a shortfall of at least 200,000 skilled trade workers, which is driving up construction-related labor costs.
On the auto side, an ongoing shortage of microchips and other critical parts is making it more costly to repair or replace a vehicle after an accident.
“In the past, the cost was around $800 to fix a bumper if you rear-ended someone. But now, chances are there is a camera in the bumper, so repairs can easily top $4,000. We love the technology that comes standard in many automobiles, but these features can be costly to repair,” said Ross Turner, president of The Turner Agency.
Another challenge on the auto side is the lack of inventory. Automakers recently reported that, as of Aug. 2021, U.S. dealers had fewer than 1 million new cars on their lots, 72% less than they did in Aug. 2019. The scarcity of new cars is causing costs to rise.
At the same time, accidents have become more frequent and severe in the past year, increasing the number and cost of auto claims. In the first six months of 2021, car accident fatalities increased 16% from the previous year, and nearly 2.5 million people sustained injuries requiring consultation with a medical professional.
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