Here’s why your auto insurance rates are rising
As most drivers know, the cost of insuring a car or truck has skyrocketed recently. Auto insurance costs rose 1.3% in August and 1.6% in September. This is an annual inflation rate of between 15 and 19%.
Larry, a Geico customer in Naples, Florida, told us that his car insurance premium recently increased by $70 per month. So he called and spoke with a customer service representative from Geico.
“She couldn’t give me an explanation and we haven’t had any accidents, tickets or claims in the past five years,” Larry wrote in a ConsumerAffairs review. “I said I wanted to know why my rate had gone up $70 a month. After several minutes she came back to me and said ‘you didn’t do anything wrong, it’s just that they’ve been paying a lot more claims in Florida lately.’
It turns out that the year-long rise in the price of almost everything has finally hit the insurance industry. Jimmy Spears, Head of Automotive at Docilea company that supports insurance companies says that insurance company costs are rising even faster than consumer prices.
Insurance industry hit by higher inflation than consumers
Spears says an auto insurance company doesn’t buy typical consumer goods, but rather specialty market goods such as auto parts. He says those costs have increased by 14.8%.
At the same time, used vehicles, which insurance companies must pay to replace cars that are a total loss, increased by 48.3%. This makes buying new cars seem like a relative bargain – those prices are up 14.4%.
“Sectors impacting insurance company costs – health care, labor and building materials – all have higher inflation rates than the 8.6% consumer rate,” Spears told ConsumerAffairs. “Allstate reports that they have a higher than average attorney involvement in claims, which impacts their decision to raise rates in Georgia by 25% this year.”
Chase Gardner, researcher at an insurance comparison site To assure, indicates that other factors are also pushing up auto insurance rates. He says negligent drivers contribute to higher premium costs.
“Insurance companies are paying more money this year than last year in most states because drivers nationwide are causing 10.5% more fatal crashes than in 2020, according to the National Highway Transportation Administration (NHSTA), and rising inflation is driving up vehicle repair and medical care. care costs by 15% and 5% year over year, respectively,” Gardner told us.
Higher rates for truckers too
Consumers aren’t the only ones receiving higher insurance bills. Dan Abrahamsen is co-founder and CEO of Whale Blanket, a US-based Insurtech that focuses on the commercial automotive industry. He says truckers are getting higher bills, which they are used to.
“For our truck drivers, we hear and advise customers to expect a 10% to 15% rate increase by 2023,” he told us. “Truckers are no stranger to rate increases, as they have increased for the past 43 consecutive quarters.”
Abrahamsen says the factors driving the rate increase this time around are largely inflation-related and include higher repair costs and higher medical bills. Julia Matseijovich, Vice President of Products at Agile pricinga rate comparison site, agrees that there isn’t one specific thing that drives car insurance rates up.
“Rates generally go up and down over time due to several factors, including increased risk,” she told us. “It could mean that insurance companies paid more to cover the costs of accidents or that drivers engaged in riskier behavior and committed more traffic violations than in the past.”
Hugh Allen, Senior Product Strategist Hi Marleya platform supporting the insurance industry, says the result is that motorists are “in a tough spot”.
“Now is the best time to compare your rates and make sure you’re getting the best price and the best coverage,” he said. “To understand current market trends, consider researching insurance costs before purchasing a new or luxury vehicle. Nothing stings more than falling in love with your new vehicle only to find that the insurance is twice as good as replacing it.”