Costs associated with the repair and new construction of homes and cars have been rising due to historic inflation and other contributing patterns, leading insurance carriers to increase home and auto premiums.
If you’ve recently visited Home Depot or Lowe’s, you’ve probably noticed that the cost of building materials has skyrocketed. Lumber costs alone increased by 42% in the first year of the pandemic. In the first three quarters of 2021, steel mill products increased by an incredible 81%. Increased material costs inevitably result in higher bids for home repairs and new construction.
To make matters worse, there is a shortage of at least 200,000 trained trade employees in the home-building industry, which is driving up construction-related labor expenses. A skilled labor shortage is reported by about 60% of the builders polled. Home claims have become significantly more expensive for insurance carriers as a result of this, combined with the rising cost of construction materials.
Auto insurance premium increases are directly tied to the supply chain issues and an increase in the number and severity of car accidents.
Microchips and other important parts such as wiring harnesses, polymers, and even windshield glass are in short supply, making it more expensive to repair or replace a car after an accident.
Automobile manufacturers recently stated that, as of August 2021, U.S. dealers had fewer than 1 million new cars on their lots, down 72% from August 20194 — and that scarcity is driving up prices. Between October 2020 and October 2021, new car costs increased by 10.6%, the largest 12-month increase since 1975, while used car prices increased by over 32%.
At the same time, in the last year, accidents have become more common and serious, increasing the quantity and cost of auto claims. Car accident fatalities jumped 16% from the previous year in the first six months of 2021, with roughly 2.5 million people suffering injuries that required medical attention.
1 CoreLogic Quarterly Construction Insights (Q2 2021).
2 National Association of Home Builders. “Building Material Prices: Large Increases Year to Date” (Sept. 2021).
3 Home Builders Institute. “New Report: Construction Industry’s Worker Shortage Hurts Housing Affordability and Supply” (April 2021).
4 CBS News. “Chip shortage likely to keep car prices sky-high through 2023” (Sept. 2021).
5 CNN Business. “’This is a crisis now.’ Biden official pleads with Congress to immediately address computer chip shortage” (Dec. 2021).
6 National Safety Council (NSC). “Injury Facts: Preliminary Semiannual Estimates” (Q3 2021).