US auto policy inflation hits all-time high; still racing with repair costs

US motor insurance policy costs accelerated again, increasing by 2% in May 2023 to bring the annual rate of inflation on policies to 17.1%, a record high for the new millennium.

The 17.1% annual increase in policy costs is up 1.6 percentage points from the prior month reading to the highest gain since points in late 2022, the latest inflation reading from the US Bureau of Labor Statistics (BLS) has indicated. Annual readings hit double digits in September 2022 while rebounding from a low at the turn of 2021/2022.

Rate gains remain a tight fit to recent cost trends in motor vehicle repair, volatile replacement costs and still palpable inflation in parts and equipment. But cumulative rate gains since before the pandemic still notably lag all measures of claims cost inflation.

Motor vehicle repair costs - volatile on the monthly readings - rose a very mild 0.3% in May to take the annual inflation reading down half a point to 19.7%.

Used vehicles rose sharply for the month, but only as the second month of gains after a period of sharp disinflation from the post-pandemic price spike.

Parts and equipment prices were flat for the month to take the headline annual inflation reading down to 4.2%, a heady disinflation ride from double digit inflation just six months ago.

Taken against pre-pandemic levels from end-2019, auto policy cost increases of 21.3% fall well below the 43.2% increase in used vehicle costs, the 35./9% increase in motor vehicle repair costs and the 23.4% increase in parts and equipment, BLS data indicated.

The broader story of consumer price disinflation regained some vigour in May, taking the headline inflation reading down to its lowest level since April 2021, the larger BLS report indicated. Energy prices, including gasoline, electricity and natural gas, led the decline.

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