You’re not alone if you’re wondering why your auto insurance rates are climbing. Across the country, auto insurance premiums are jumping, and in some states, drivers are seeing a 15% increase in premiums from 2022. According to a recent study by Bankrate, Virginia drivers reported an annual average increase of 7.4%.
These increases are impacting millions across the United States, as household budgets continue to be affected by inflation. A large component of being a wise consumer is being an informed consumer, and it’s important to understand the factors driving the auto insurance premium increases you’ve seen so far this year.
Factors Driving Auto Insurance Costs
Several pandemic-related trends are contributing to higher auto insurance rates in the industry, with inflation being one of the most significant factors. Inflation refers to the general increase in prices of goods and services over time, and as the cost of living goes up, so too does the cost of protecting customers on the road.
According to the Bureau of Labor Statistics, inflation peaked at 9.1% in June 2022 and closed 2022 at a 6.5% reading. As you will see below, the overall increase in cost for goods and services affects claims and leads to high loss costs (i.e., paying out claims for accidents, liability, and theft) for insurers, which, in turn, results in consumers paying more for coverage.
- Increased frequency and severity of accidents. With more people returning to work and traveling, more cars are on the road, leading to increased accidents. This increased frequency of accidents leads to more claims and, amid a labor and supply chain shortage for auto parts and repairs, leads to higher losses for insurers. Higher rates of severe and fatal accidents have also resulted in record-high liability claims and payouts. In an effort to remain profitable and get costs under control, insurers are raising prices for coverage.
- Rising medical costs. Medical care costs continue to increase, affecting car insurance rates as well. When accidents occur, medical expenses are often a significant part of the claim, and as medical costs go up, so does the cost of providing insurance coverage.
- Increased repair costs: With the rise in new car sales, the cost of vehicle parts and repairs is also increasing. This increase in repair costs translates to higher insurance rates.
Please note that these are just a few factors that influence rising premiums. Talk to your agent to see if any factors unique to you could be addressed to help bring premiums down.
What Can You Do?
After the question, “Why are my rates increasing?” often comes, “What can I do to lower my costs?” That’s where InsurePro LLC can help. We’re committed to helping you get the coverage you need that works with your budget. Contact us today to learn more.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.