Auto insurance carriers are grappling with inflation trends, according to a recent report by the American Property Casualty Insurance Association (APCIA) titled, “The New Normal? Auto Insurers Continue to Struggle with Inflation.” With the U.S. inflation rate at its highest level in 40 years, inflation is pushing up costs for auto insurers when it comes to medical expenses, auto repair, car rental, and vehicle replacement. Auto insurance panel counsel law firms are likely seeing these trends first hand.

The current environment has already affected loss ratios reports APCIA: “U.S. private passenger automobile (PPA) loss ratios spiked from 57.8 percent in the fourth quarter of 2020 to 78.4 percent in the second quarter of 2022, reaching the highest quarterly loss ratio in more than 20 years.”

APCIA’s research reveals trends in the auto insurance industry, as listed below, that multiply inflation’s impact on an insurance company’s total incurred losses:

  1. Driving habits are returning to their pre-pandemic levels.
  2. Claim frequency is increasing after a temporary reprieve attributed to COVID-19.
  3. Injury claim severity is increasing.
  4. More vehicle damage claims.
  5. Deterioration in driving behavior including riskier driving, more crashes with pedestrians and bicyclists, and an increase in multi-vehicle crashes.
  6. Skyrocketing auto theft rates.

Claim costs for insurance companies will continue to increase as these trends are expected to persist in 2023. If claim costs exceed premiums, the insurance company’s combined ratio could rise above 100%, indicating the company is not making a profit unless it has another source of income.

Auto insurance Panel Counsel Law FirmsAccording to Insurance NewsNet, Allstate, Progressive, GEICO, and State Farm have already increased their premiums starting in late 2021. In our August 2022 post GEICO Closes Calif. Offices; 2022 Claims & Costs Rise, Geico closed 38 agent offices in response to an increase in claim costs this year. To lessen the risk of going out of business, more insurance companies may raise premiums on bodily injury and personal injury protection (PIP) auto insurance policies or take other measures such as closing offices like GEICO did.

Insureds may switch to another carrier or risk driving without insurance, as consumers may not be able to afford higher auto insurance premiums while inflation is also driving up the cost of living. This could have a domino effect on other areas of the insurance industry by raising the costs and premiums on underinsured and uninsured (UM/UIM) insurance policies.

Implications for Auto Insurance Panel Counsel

Auto panel counsel members will want to monitor how their insurance carrier clients are reacting to inflation in their backyards. Depending on how insurers respond to increasing claim costs, insurance defense law firms may start seeing a decrease in the number of claims in the long-term if consumers switch carriers for cheaper premiums or if insurance carriers close offices in an area thereby resulting in fewer customers in the affected neighborhoods.

Law firms representing auto carriers may want to diversify their client base with other major carriers. Now is a good time to look for new client opportunities with middle market carriers and carriers serving small businesses to minimize a negative impact on the law firm’s own profit margins.

Auto insurance panel counsel law firms likely notice how inflation is affecting the cost of doing business themselves. Law firms may want to network with multiple vendors to ensure their clients pay lower litigation costs for services such as court reporting and translation. After the pandemic encouraged everyone to work remotely, some court reporters and translators are now charging an extra fee to appear live. They may also refuse to appear live for jobs when there is such a high demand for remote jobs. While law firms may not be able to control costs of doing business with third party companies, they may be under pressure to keep litigation costs down.

While we will have to continue monitoring how inflation trends are impacting the insurance industry, now is a good time for auto insurance panel counsel law firms to increase their leadership impact by expanding marketing activities. This can include posting blogs on the firm website, being visible on social media platforms like LinkedIn, presenting at conferences, and publishing articles in bar association magazines or journals.

Insurance Defense Marketing Consultant for Law Firms

If your insurance defense law firm is asking how you can improve your marketing communications and business development efforts, give us a call. We have helped more than 240 insurance defense law firms in 43 states pursue new client opportunities.

Legal Expert Connections, Inc. offers three key benefits to insurance defense law firms nationwide:

  1. We are the leading U.S. legal marketing agency specializing in the insurance defense market. We make it our business to identify who you need to contact at an insurance company, corporation or municipality to be considered as a panel counsel member. We accelerate your business development process by helping you focus on introducing your law firm to new prospective clients.
  2. You get a structured business development process. We guide your law firm through a proven three-step campaign that brings discipline, focus, and productivity to your marketing efforts.
  3. Increase revenue with professional, Bar-compliant legal marketing campaigns. We do the research to identify insurance panel managers, so you can focus your time on the business development process.

Contact Margaret Grisdela, an insurance defense marketing consultant, at 1-561-266-1030 or via email. Connect with Margaret Grisdela on LinkedIn.


This article is provided for educational purposes only. It is not to be interpreted as legal advice or an opinion in regard to any topic discussed. The article should not be used as a substitute for legal advice from a licensed attorney in your state. Every situation is different and circumstances vary widely depending on the governing state law, policy provisions, and related considerations.