Like many Americans, you may have noticed a premium increase on a recent billing statement from your auto insurance carrier. Maybe you’ve asked yourself: "Why does my car insurance keep going up?"
Your car insurance premium can rise for a variety of reasons, like when a discount expires, your vehicle usage increases, or if you get a speeding ticket.
The economy can also be a factor in your car insurance rate. Keep reading to understand more about the relationship between car insurance premiums and the economy.
Visit Credible to learn about auto insurance and get quotes from top carriers.
- What to know about insurance and inflation
- Why are car insurance rates rising?
- How to lower your car insurance rates
When the pandemic began in 2020, lockdowns kept many drivers off the road, resulting in a profitable year for insurers. Many insurance carriers even issued rebates to their policyholders or reduced rates, according to a Wall Street Journal report.
The economic story of 2022 has been massive inflation driving up costs in nearly every industry. In fact, between June 2021 and June 2022, the Consumer Price Index spiked 9.1%, a 40-year high. That means you’re spending 9.1% more on goods and services than you were a year ago.
As such, you’re paying more to fill up your gas tank, put food on your table, and, yes, insure your vehicles. Many auto insurers are raising premiums by 6% to 8% or even higher in some cases, according to The Wall Street Journal.
In the face of higher prices, it might be tempting to save money by reducing your car insurance coverage, but that may not be a wise move. While you may save on your monthly premium with lower coverage amounts, you could end up with higher out-of-pocket expenses after an accident.
A number of factors contribute to insurance premium increases, many of which are outside your control. For instance, the volume of auto accidents and their costs are an auto insurance pricing factor in every state, according to the Insurance Information Institute.
Other factors causing the auto insurance market to raise insurance rates for drivers include:
- Car prices — Both used and new cars experienced skyrocketing inflation in 2021. While rising prices have begun to cool, the price for new vehicles still climbed a scorching 10.4% between July 2021 and July 2022. Similarly, used cars and trucks also increased 6.6% during the same period. Remember, expensive vehicles cost more to repair and, consequently, require higher coverage amounts and premiums.
- Repair costs — Supply chain disruptions, higher prices for auto parts, and worker shortages lead to increased costs to repair your car and, in turn, higher insurance rates. Vehicle repair costs were 8.1% higher in July 2022 than in July 2021, according to the U.S. Bureau of Labor Statistics.
- The chip shortage — Semiconductor chips are a critical component of modern vehicles that drive everything from your navigation system to your tire pressure sensors. Unfortunately, chip shortages are pushing up the price of cars, which means it’s more expensive to insure your vehicle as well as repair it after an accident.
- Labor and administrative costs — Labor shortages have also led to higher repair and insurance costs. The demand for transportation technicians outran supply by 5-to-1 in 2021, according to a TechForce Foundation report. With fewer people to perform auto repairs, companies must entice qualified technicians with higher pay, contributing to insurance inflation.
- Post-pandemic driving activities — Drivers were off the road at unprecedented levels in 2020, with many drivers no longer needing to commute to work, school, or regular day-to-day activities. But as driving levels return to pre-pandemic rates, insurance claims are up, along with insurance premiums.
Credible makes it easy to compare auto insurance rates from multiple carriers, all in one place.
You may not be able to control the premiums in the auto insurance market, but you can take steps to lower your auto insurance rates, such as:
- Shop for the best deal. Get quotes from multiple car insurers to ensure you’re getting the best deal available. While price is an essential factor to consider, it’s equally important to review each insurer’s financial stability outlook with rating companies like AM Best and Standard & Poor’s.
- Bundle auto and homeowners policies. Buying more than one policy from the same insurance carrier — or bundling — may qualify you for a multi-policy discount. For example, you might save money by buying car insurance from the same insurer that carries your homeowners insurance.
- Ask for discounts. Take advantage of any discounts you may be eligible for, such as low mileage, good student, and senior discounts. Work with your agent to see which discounts are available to you.
- Practice safe driving habits. You may qualify for a defensive driver discount by taking a defensive driving course. Additionally, practicing safe driving habits may reduce your odds of a motor collision and help keep your driving record free of traffic violations.
- Increase your deductible. Raising your deductible — the amount you pay on a claim before your insurance coverage kicks in — can reduce your policy premium now. Remember, though, you’ll pay more up front if you file a claim in the future.
Keep in mind, car insurance premiums typically change from year to year. Implementing the above steps may help you fight rate increases and make your premiums more manageable until inflation tamps down.
If you’re ready to get auto insurance quotes, Credible lets you quickly and easily compare insurance rates from top carriers.