Every day you read a new article on the effects of inflation on the things we buy.

Let me try to explain what is happening in the automobile insurance market. When the COVID lockdown occurred auto insurance companies quickly realized people were driving less and claims costs were going to go down. Most of the large insurance companies lowered their rates or returned premiums in the form of dividends.

When the COVID restrictions were lifted, people who had been locked up in their homes began driving more. They went to work, they went on vacation and they had more claims. The auto insurance industry reacted to the increase in driving by raising rates.

At this same time, inflation increased to a 40-year high and supply chain issues caused delays in repair of vehicles and increased the price of used vehicles.

Automobile policies have been affected on every section of coverage they provide. When there are delays in repairs, the insurance companies that are liable for the repairs are now paying more for rental reimbursement. The cost for parts has increased and labor cost are up. Vehicles that are totaled (determined to be not repairable) are now receiving higher payouts. More vehicles are being totaled because of higher repair costs. The simple cost of towing a vehicle has increased because of gasoline cost and labor charges.

An article recently appeared in The Wall Street Journal about how the theft of catalytic converters is 10 times higher than 2019. Converters used to reduce pollution in automobiles contain precious metals, and sophisticated rings have been formed to steal them.

Medical payments have increased because of higher costs in hospital and nursing facilities.

Weather-related events are also increasing the number of claims. I recently read that 50,000 to 70,000 cars were destroyed by Hurricane Ian.

Lastly, litigation cost have increased. Defending policy holders from lawsuits when they are involved in an accident now cost more.

When insurance people meet they always discuss two things: frequencies and severity – sort of like the perfect storm. More claims, higher costs, rates are going up.

Here’s some advice on how to deal with your rate increases.

Call your insurance agent and review your current policy. Make sure you have the correct drivers, and correct use of the vehicle. If you only drive 5,000 miles a year, make sure your insurance company knows that.

If you have older vehicles, make sure you are not paying for comprehensive and collision coverages. You could be paying more than the vehicle is worth.

Ask about discounts like loyalty and multiple policy discounts. Most companies offer discounts if you have home or renters policies linked to your car policy.

I have written before, but telematics is the future of car insurance. If you have a smartphone and an email address, you qualify. By downloading an app and placing a beacon in your vehicle you can save 10 to 30% on your premium. This program can only decrease your rates.

Lastly, shop around with the major companies and see what they offer, but be careful. Some companies offer discount rates for new customers but these discounts disappear at your next renewal. We recently had a customer buy a condominium and get convinced he could save money on the condo policy by going with another company. He saved $80 on the condo policy, but his car insurance went up $1,200.

His new company had been in business since 2019 and did not offer car insurance.

When we obtained the paperwork, the address the new company was using for location of the property was a shopping mall.

Caveat emptor is latin, meaning “let the buyer beware.”

Bob Hollick is a State Farm Insurance agent based in Washington. His column appears every other Friday in the Observer-Reporter.