Car Insurance Premiums on the Rise: What’s Driving the Increase?
According to a recent report by Insurify, inflation is significantly impacting car insurance premiums. The study, based on over 40 million consumer quotes, sheds light on the various factors influencing these rising costs and offers insights into how drivers are responding.
Factors Influencing Premiums
Several variables contribute to the fluctuation of car insurance rates. These include weather patterns, crime rates, and population density, which create regional variations, according to the Insurance Information Institute. State-level legislation also plays a crucial role, with different driver attributes used by insurers to set rates and varying minimum coverage requirements.
Other factors that can affect the cost of insurance premiums include:
- Car type
- Marital status
- Driving record
- Homeownership
- Age
- Gender
- Education
- Credit score
Insurify’s report identified significant regional differences. Michigan, Louisiana, and New York have the highest premiums, while Hawaii, North Carolina, and Wyoming have the lowest. The study also found that city drivers pay, on average, 15% more for auto insurance.
Consumer Responses to Rising Costs
To combat the increasing costs of car insurance, over 1,200 survey respondents shared their strategies:
- Driving less (65%)
- Purchasing an electric vehicle (EV) or hybrid (30%)
- Switching insurance carriers (30%)
- Moving closer to public transportation or walkable areas (16%)
- Dropping insurance (10%)
Bart Mazurek, Vice President of Consulting and Services at CCC Intelligent Solutions, noted during the MSO Symposium in Las Vegas that traffic volumes are returning to pre-pandemic levels. Still, fewer accidents are happening due to decreased traffic congestion, mainly caused by remote work.
Snejina Zacharia, CEO of Insurify, explained the broader economic context to Yahoo Finance. “While we saw the economy accelerate and demand rebound following the pandemic, Americans’ overall cost of living, including insurance, increased in 2022 due to built-up pandemic-related disruptions and increased inflation.”
The Impact of Inflation on Driving Habits
A survey of 2,000 drivers conducted by U.S. News & World Report in August found that 49% are driving less due to the pandemic and 61% because of higher gas prices. AAA reported in September that the average yearly cost to own and operate a new vehicle has increased to $10,728, or $894 per month, which is $1,000 more than in 2021. These increases are linked to the skyrocketing prices of used vehicles and the rising average age of vehicles.
AAA points to gas prices as the most significant factor contributing to 2022’s average cost increase.
Navigating the Current Insurance Market
Due to the current economic situation, Insurify suggests in its findings that it is challenging to anticipate which companies will increase their rates and when. The company advises drivers to compare quotes from at least four to five companies before choosing a policy. They also recommend comparing quotes every six months or so to ensure the current policy and premium meet the driver’s needs.
It’s worth noting that some insurers may offer lower premiums to customers who have been with one company for over a year. Seeking discounts by bundling home and insurance policies or through AAA membership can help reduce premiums. In fact, a single discount could potentially cut 15% off yearly car insurance premiums, according to Insurify.
“One-third of drivers are not taking advantage of any discounts, including 16% that don’t take advantage even if they know they qualify for one or more,” Insurify said. “Finding a policy with one or more discounts can be an easy way for drivers to save on car insurance.”
Betsy Stella, Insurify’s vice president of insurance partnerships, believes that the U.S. insurance market’s “current volatility” will likely not stabilize until at least mid-2023. “Based on our comprehensive research and feedback from over 100 carriers, the general consensus is that it will be eight to twelve months [from fall 2022] before the market stabilizes,” she stated. Some experts expect a soft market to return in several years.
Key Takeaways
- Inflation is Increasing Premiums: Rising costs of living are creating a squeeze on drivers.
- Regional Differences Exist: Where you live significantly impacts what you pay.
- Consider Your Options: Compare multiple quotes and explore discounts to save money.
