As automobile costs average from a pandemic-era surge, insurance coverage has pushed the price of automobile possession to the brink for a lot of People.New information out this week confirmed auto insurance coverage prices rose 20.6% from the prior yr in February, matching January’s enhance as probably the most since December 1976, when prices rose 22.4% over the prior yr.On an annual foundation, motorcar insurance coverage prices rose 17.4% in 2023, probably the most since a 28.7% enhance in 1976, in accordance with information from the BLS.The sticker shock hitting many American drivers is being pushed by an increase in accidents, the severity of accidents, and geographical elements combining to create an ideal storm and push prices larger.Learn extra: Suggestions for getting low cost automobile insurance coverage’Severity’ and bodily harm claims on the riseThe most alarming issue driving insurance coverage prices larger is extra extreme claims.”Generally, the numbers of crashes, accidents, and fatalities are up, and inflation has made the price of repairs costlier,” AAA spokesperson Robert Sinclair instructed Yahoo Finance.Sinclair mentioned motorists developed “dangerous habits” on the street throughout pandemic lockdowns, contributing to present conduct. For instance, because the New York Occasions reported earlier this yr, researchers in Nevada found that throughout the pandemic, motorists have been dashing extra (and driving by intersections), seat belt use was down, and intoxicated driving arrests have been as much as close to historic highs.Sinclair additionally pointed to NHTSA information, which discovered that in 2021, on the peak of the pandemic, street fatalities elevated by 10.5% to their highest stage since 2005, even whereas most People stayed at residence. The NHTSA mentioned it was the very best share enhance it had ever seen. The company discovered that fatalities in 2022 solely decreased by 0.3% as in comparison with 2021.Insurance coverage tech agency Insurify discovered that auto insurance coverage premium hikes have been “largely because of the skyrocketing worth of auto elements and the growing quantity and severity of claims.” And whereas will increase could average, analysts nonetheless imagine additional premium hikes are on the horizon.Story continues”Whereas the magnitude of charge will increase is more likely to ease considerably, after a number of years of double-digit will increase, some lingering declare value inflation and antagonistic declare severity and frequency will probably result in a ‘larger for longer’ auto charge setting,” CFRA analyst Cathy Seifert instructed Yahoo Finance.Not surprisingly, extreme accidents depart insurance coverage firms with rising loss ratios, or a share of premiums collected that insurers paid out in claims.”Broadly talking, severity in [the] auto [business] is working mid- to high-single digits — suppose nearer to mid within the car severity, suppose nearer to excessive in bodily harm — and in order that’s form of the place developments are working as we speak,” Vacationers (TRV) private insurance coverage president Michael Klein mentioned throughout the insurance coverage big’s newest earnings name in January.”We have seen a little bit of a combination shift in the direction of extra bodily harm claims, which is without doubt one of the issues that has us maintaining our severity development estimates at that form of elevated stage,” Klein added.In response, Vacationers elevated premiums, particularly for patrons renewing their insurance policies. Within the fourth quarter, its renewal premium worth change was a whopping 16.7% in its auto enterprise, contributing greater than $2 billion of further premium into the section in comparison with the identical quarter final yr.GEICO, the cost-conscious insurer owned by Warren Buffett’s Berkshire Hathaway (BRK-A, BRK-B), additionally felt the results of these rising severity claims.The second-largest auto insurer in America behind solely State Farm, GEICO was hit by six consecutive quarters of underwriting losses starting on the peak of the pandemic. The corporate has since responded with extra aggressive coverage writing, trimmed advertising budgets, and better premiums.GEICO finally earned $3.64 billion earlier than taxes from underwriting in 2023, however the development of upper severity of claims stays.Shareholders pose for an image with a Geico mascot on the Berkshire Hathaway annual shareholder’s assembly on April 30, 2022, in Omaha, Neb. (Scott Olson/Getty Photographs) (Scott Olson through Getty Photographs)”Common claims severities continued to rise in 2023 because of larger auto restore elements costs, labor prices, and medical inflation,” the insurer mentioned in mother or father Berkshire Hathaway’s 2023 annual report, regardless of the frequency of claims coming down for property and auto claims.GEICO mentioned, “Common claims severities in 2023 have been larger for all coverages, together with property harm (14-16% vary), collision (4-6% vary), and bodily harm (5-7% vary).” GEICO additionally sought charge will increase in quite a few states in 2022 and 2023 in response to accelerating claims prices.On the flip aspect, insurer Progressive (PGR) famous in its newest earnings report that the severity and frequency of claims have been coming down, suggesting some aid for the insurer’s backside line and maybe client wallets.”Severity appeared to average somewhat bit [in Q4], and so we’re hoping that it is somewhat bit benign,” Progressive CEO Tricia Griffith mentioned in Progressive’s fourth quarter earnings name. “Once you take a look at final yr, we have been affected by fixing vehicles, and that appears to be somewhat bit calmer.”Complicated repairs, rising labor costsAs bodily harm and property harm prices rise, so too have the incidence of extra advanced repairs and the necessity for costlier mechanics to get them carried out.New car costs have risen over 20% since 2019, resulting in a rise in the price of elements. Moreover, newer vehicles include extra know-how, comparable to sensors and management modules constructed into bumpers and exterior panels, which makes a easy fender bender a possible several-thousand-dollar restore.And like nearly all industries because the pandemic, the price of labor has risen dramatically as effectively.”Inside auto restore, most of our bills are human beings, and as minimal wage legal guidelines come into impact, that pushes the price of labor up,” a basic supervisor at a serious Southern California-based auto seller instructed Yahoo Finance.An auto mechanic walks beneath a car being repaired from a carry at Gates Automotive Service on Jan. 13, 2022, in Louisville, Ky. (Jon Cherry/Getty Photographs) (Jon Cherry through Getty Photographs)A scarcity of provide of technicians that deal with probably the most advanced repairs has additionally pushed prices larger. “To offer you some perspective, I’ve transmission technicians and diesel technicians that make $200,000 a yr,” the overall supervisor mentioned.The variety of employees employed within the motor autos and elements trade fell greater than total employment throughout the pandemic, dropping nearly 40% from peak to trough. And whereas employment on this trade has since surpassed pre-pandemic ranges, it took till August 2022 to get better.One other concern for sellers and the service enterprise is the rise of electrical vehicles.Whereas the speed of service for EVs is decrease, EVs have a “a lot larger magnitude” of prices, the overall supervisor mentioned, relating to physique or structural repairs. EVs additionally are inclined to require a extra superior tech answer, requiring much more specialised technicians in a good shorter provide.Learn extra: Are electrical vehicles costlier to insure?Griffith, Progressive’s CEO, for her half famous that storage labor charges have been nonetheless rising, saying the corporate’s auto elements inflation was “nearing zero,” however that auto companies inflation was nonetheless rising by “mid-single digits.”Climate catastrophes ‘are usually not going away’The place you reside additionally performs a giant think about what you pay to insure your car: Extreme climate in states like Florida, Louisiana, and South Carolina has drivers paying premium prices that exceed the nationwide common.In Louisiana, auto insurance coverage prices are the very best within the nation on a per-capita foundation, with 4.7% of the median family’s earnings going in the direction of automobile insurance coverage, Insurify famous.In Florida, what Insurify referred to as “rampant” insurance coverage fraud, together with pure disasters, pushed premiums as much as almost $3,000 a yr on common.”The typical full-coverage insurance coverage charge in Florida is $243 monthly, influenced by extreme climate occasions that pressure the state’s insurers,” Insurify’s report mentioned. “In 2022, Hurricane Ian prompted $109.5 billion price of harm in Florida, making it the most expensive hurricane within the state’s historical past, in accordance with NOAA.”Insurers and policyholders did get a respite in 2023 with a comparatively calm hurricane season, however there is no expectation {that a} repeat will occur within the years forward.”Whereas 2023 outcomes benefited from the dearth of a record-breaking disaster (like Hurricane Ian), catastrophes and risky and outsized climate patterns are usually not going away,” CFRA’s Seifert mentioned.Pras Subramanian is a reporter for Yahoo Finance. 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