I came across this article in Forbes magazine and thought I would pass it along. The article was originally published in August of 2023 and updated in December.
Car insurance rates are up by double digits and drivers may not see relief anytime soon. According to the government’s latest consumer price index release, the cost of auto insurance soared 17.8% from July 2022 to July 2023.
Drivers currently pay an average of $1,668 for their car insurance policy, according to the online insurance agency Insurify. New Mexico, Nevada and New Jersey are seeing the highest annual rate increases in 2024, with prices soaring by 38%, 36% and 34% respectively.
Experts point to four main reasons for the spike in car insurance rates:
Costs associated with driving are higher.
More cars are on the road—which means more accidents.
Auto theft has surged.
As catastrophic weather events multiply, there’s an uptick in the number of damaged and totaled cars.
Inflation Boosts Car-Related Costs
In general, driving a car today is more expensive than it was a couple of years ago. Inflation—which ticked up in July 2023, rising to an annual rate of 3.2%, from 3% in June—has increased the cost of owning a car, including higher repair costs and medical treatments due to car accidents. Insurance companies are passing these higher prices on to their customers.
The cost of vehicle maintenance and repair has jumped by 12.7% year over year, according to the consumer price index report.
“The cost to repair is much higher than ever due to the many technological and safety advancements that have been made,” says San Antonio personal injury lawyer George Salinas. “Even something as simple as a bumper can have a combination of sensors or other parts that get expensive really quickly.”
More Drivers on the Road Means More Accidents
As driving increases, so does the chance of car accidents—and the odds that insurance companies will have to fork over more payouts.
The National Safety Council reports that the number of miles driven in May 2023 increased by 2.5% compared to May 2022. Annual mileage is 30% higher than in 2020, when the country was largely locked down due to Covid.
Last year, drivers hit and killed more than 7,500 pedestrians, the most since 1981.
“The frequency and severity of accidents have risen recently, leading to higher payouts by insurance companies,” says Maria Coello, an insurance agent with MyClick Insurance. “This trend has compelled insurers to adjust their premium rates to maintain their financial stability and ability to fulfill claims.”
Car Theft Zooms by Double Digits
Car thieves are out in big numbers. Motor vehicle thefts jumped by an eye-popping 34% during the first half of 2023 compared to the same time period last year, according to 2023 mid-year statistics put out by the Council on Criminal Justice.
Salinas says replacing these cars has become more expensive. Referring to the shortage of cars during Covid, he notes, “The bubble that hit the new and used car market…means higher economic losses when those vehicles are totaled out.”
Cars Hit by More Floods, Fires and Other Natural Disasters
Over the past few years, catastrophic weather events have inflicted more damage on cars, which means a steep increase in costs for insurance companies as they pay out more claims. “Although some planning is made for natural disasters in economic forecasts, the number of these has exceeded what insurance companies or anyone else have anticipated,” Salinas says.