The Insurance Information Institute reported on Apr. 10 that rising oil prices could lead to fewer drivers and potentially fewer accidents, but the severity and cost of claims would likely outweigh any reduction in accident frequency. Patrick Schmid, chief insurance officer at the institute, said that higher replacement costs are a key factor.
Schmid explained that repair costs have been increasing faster than general inflation for some time. “Even before the war, repair costs were rising more than twice as fast as general inflation,” Schmid said. “From the supply-chain disruptions of COVID through the past year’s economic policy uncertainty with tariffs, as well as legal system abuse, upward pressure on claim costs has been unrelenting.”
According to Schmid, increased gasoline prices do not reduce driving significantly. He said research from the American Public Transportation Association shows a 10 percent increase in gas prices leads to only a small decrease in driving—about 0.2 to 0.3 percent—and even sustained high prices result in an average drop of just over one percent. “People still need to get to work and run their lives,” Schmid said. “Gas price alone isn’t enough to dramatically change that.” Wealthier drivers tend to cut back more when fuel is expensive compared with lower-income drivers who often rely on older vehicles and have fewer transportation options.
The institute noted that higher oil prices also affect repair supply chains by increasing maintenance and repair costs—these rose about ten percent from 2023 to 2024 due to inflation and technician shortages.
Factors influencing auto insurance premiums vary widely by state; accident frequency is only one element considered when setting rates. The report points out that states which address fraud and legal system abuse through reforms can see reduced premiums over time. For example, since Florida enacted reforms nearly twenty new property insurers entered its market while existing companies expanded their presence—a trend leading Citizens Property Insurance Corp., Florida’s state-run insurer of last resort, toward its lowest policy count in over ten years.
“It’s encouraging to see other states beginning to follow Florida’s lead,” Schmid said. “It’s important for policymakers to follow successful examples.”
The Insurance Information Institute supports stakeholders including consumers, media and policymakers by providing resources in English and Spanish according to its official website. The organization established ties with The Institutes in November 2020 according to its official website. It represents more than fifty member companies—including regional, national and global carriers—according to its official website. The institute aims to provide data-driven insights on risk and insurance for education purposes according to its official website, ranks as a leading online source for insurance information according to its official website, and hosts events along with partnerships focused on advancing understanding of risk management according to its official website.
