The social media platform formerly known as Twitter has been all atwitter recently with people grumbling about the accelerating cost of auto insurance premiums. Even good drivers, those without accidents or speeding tickets, are getting hit with, on average, increases of 20 percent to 25 percent—for a product that’s already expensive. So hefty are the new bills that the increases alone contributed conspicuously to the nation’s overall inflation rate in the early months of 2024.

Auto insurance is a product that people love to hate, with good reason. We’re forced to purchase it (often at government-mandated levels), hope we never have to use it, and feel aggrieved when we must pay more for the mistakes of others. While insurers and bad drivers often catch the blame for hefty bills, the latest round of premium increases, coming amid other persistent price hikes, is making people wonder whether government is contributing to the problem, too—with policies that a majority of Americans already blame for inflation elsewhere in the economy. It’s a good question, especially as the Biden administration and its surrogates struggle to convince Americans that their financial lot is better than most people believe it is.

Most mainstream press coverage of the insurance hikes have little to say about government policies. Insurers’ costs are going up, the media explain, because the supply chain problems that began during Covid persist and have made replacement auto parts more expensive. Meantime, labor costs, as employers struggle to keep up with worker demands for higher wages as prices rise, are also climbing. Thus, the outlay for car repairs has become one of the typical American household’s chief worries, even ahead of health care and mortgage costs. And Americans are getting into more accidents, including deadly crashes, which is also adding to insurers’ woes.

It’s worth looking more deeply at some of these issues. The world’s supply chain problems, for instance, began to emerge in 2020 during the Covid lockdowns, which cut industrial output and made prices explode. Logistics difficulties caused by breakdowns in transportation systems meant that, even when suppliers produced goods, they had trouble getting them to customers. American manufacturers scrambled for answers. One option was to bring overseas jobs back home to gain better control over supply lines. A 2021 survey of leading industrial firms found that automakers and parts manufacturers were most intent on so-called reshoring, with more than half of all firms saying that they wanted to bring production back home to ensure adequate supplies at reasonable cost.

But that great reshoring process never happened for makers of auto parts, who still have fewer jobs in America than they did pre-Covid—fewer jobs, in fact, than at any time since 2016, according to the Bureau of Labor Statistics. One clue as to why: even as American manufacturers contemplated ramping up production domestically, the confidence level of industrial companies began falling early in the Biden administration. That level has now declined by nearly one-third over two years, even though Covid has receded in that time. Firms have been shaken by the rising interest rates from the Federal Reserve’s inflation battle, and by what the National Association of Manufacturers calls a “regulatory onslaught” from the Biden administration.

Nearly two-thirds of industrial firms recently said that Biden administration rules already enacted and new ones being promulgated raise costs significantly. Industrial firms, which use nearly one-third of the energy America produces, have been pummeled by high energy costs, likely to keep rising due to new administration limits on drilling. At the same time, the White House and Congress failed to address the expiration of favorable tax treatment of research costs and interest-expense deductions in the Trump 2017 tax cut package, prompting many firms to pull back on new business investments.  Meantime, automakers and parts suppliers complain about a “regulation mess” created by overlapping federal and local bureaucratic agencies, whose rules affecting cars have sent production costs skyrocketing. No wonder, then, that the prices on replacement parts for cars have been going up at double-digit rates over the past two years, driving overall repair rates higher for the average customer and for insurers.

While those price hikes alone would be enough to jolt insurance costs, they’ve been accompanied by a seemingly unrelated but equally troubling problem: mounting accident rates. American roads had been getting safer for years, with the number of traffic deaths per miles traveled dropping consistently, but accidents surged during the pandemic. Some experts have reasoned that, with lighter traffic during lockdowns, those still on the roads drove faster, apparently developing “bad habits” that resulted in more accidents. The problem with this logic is that other countries that enforced lockdowns didn’t see accident rates rise. Meantime, the number of crashes per year has remained high in America even as Covid has faded.

Part of the story can be glimpsed in a recent headline, “Drunken-Driving Deaths Are Up. Why Are DUI Arrests Down?” The answer: in the wake of the riots spurred by the death of George Floyd in May 2020 and the resulting “defund the police” movement, traffic enforcement in America has cratered. The number of drunk-driving arrests has fallen by about 25 percent nationally since before Covid. Not surprisingly, crash deaths attributed to drunk drivers have gone up by one-third. Overall, traffic citations per 100 million miles traveled on America’s roads plummeted from 1,500 a month before the pandemic to 900 a month in early 2023, according to one analysis.

Some cities that saw especially violent protests against police in 2020 have witnessed drastic pullbacks in policing. The number of traffic violations police issued in Seattle, for instance, has declined by more than three-quarters since 2019, as the size of the city’s police force has shrunk. The San Francisco Chronicle calculated a more than three-quarters drop in citations in that city over two years. In New York, traffic citations fell by 50 percent from before the pandemic, even as deaths attributed to speeding have grown dramatically. The result has been not just a predictable increase in the frequency of crashes but more severe accidents, too. That has sent claims against insurers for property damage and injuries escalating.

The combination of greater regulation of business and less enforcement of existing laws makes for a strange brew of politics that’s emerged on the left today. On the one hand, government is ratcheting up pressure on legitimate businesses and individuals, making it ever harder for them to conform to regulations and keep costs down; on the other, jurisdictions are spending less time enforcing long-standing, sensible laws like those against drunk driving. What underlies these two seemingly opposed trends is a growing anti-bourgeois philosophy that seeks to restrain and bring to heel our most productive individuals and their enterprises, even as it tolerates activities from others that undermine the social order. The average American has a vague, uncomfortable sense that something is amiss, but it manifests as a series of seemingly unrelated woes—like swelling auto insurance rates. In truth, your eye-watering insurance bill is just one reflection of a much bigger problem.

Photo: gopixa/iStock/Getty Images Plus


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