Shocked by Your Car Insurance Costs? Here’s Why They’re Soaring

If you’ve been feeling the pinch lately every time you pay your car insurance premium, you’re not alone. Recent data from the U.S. Bureau of Labor Statistics (BLS) reveals a startling trend: car insurance costs are skyrocketing faster than any other service we buy. Let’s dive into the numbers, explore the reasons behind this surge, and look at what you can do to keep your wallet from taking too big a hit.

The Numbers Don’t Lie: Insurance Costs Are Soaring

The latest consumer price index data from the BLS paints a clear picture of the situation:

• Americans spent 20% more on car insurance in 2023 than in 2022
• This is the largest such increase since 1976
• Car insurance topped the list of items tracked by the BLS as having the highest annual cost increase
• In just three years, car insurance costs have risen by a staggering 43% compared to December 2020

To put this in perspective, even as overall inflation is cooling down to 3.4% as of December 2023, car insurance continues to see double-digit surges. Among the roughly 200 categories the BLS tracks, only frozen noncarbonated juices and drinks came close, with a 19% increase.

Why Are Insurance Rates Climbing So Rapidly?

Several factors contribute to this unprecedented rise in car insurance costs:

1. Pandemic Rebound: During the COVID-19 shutdowns in 2020, insurance companies saw a significant drop in claims, leading to lower rates and even rebates. As the economy reopened, rates began to bounce back sharply.
2. Increased Accident Severity: The pandemic saw a rise in speeding-related accidents, causing the most yearly fatalities in a decade. This increase in severe accidents has led to higher payouts and, consequently, higher premiums.
3. Rising Vehicle Costs: New car prices have seen significant increases, with spending on new cars jumping by 13% year-over-year in April 2022. While this has stabilized somewhat, the overall higher vehicle values mean more expensive replacement costs for insurers.
4. Repair Cost Inflation: Vehicle maintenance and repair costs jumped 7% last year and are up 27% since December 2020. This is due to:
   • Labor shortages in the auto repair industry, driving up labor rates
   • More expensive parts and components, especially in newer vehicles with advanced technology
   • Higher costs for repairing or replacing LED lighting and sensors in modern cars
5. EV Considerations: While electric vehicles are not necessarily more expensive to insure overall, damage to their battery packs can result in significantly higher repair bills.

What Can You Do to Keep Your Insurance Costs in Check?

Despite the gloomy outlook, there are steps you can take to potentially lower your insurance costs:

1. Shop Around: Don’t assume the company with the funniest ads offers the best rates. Compare quotes from multiple insurers, including smaller, local companies.
2. Bundle Policies: Many insurers offer discounts if you combine your auto insurance with home, renters, or other types of coverage.
3. Raise Your Deductible: If you can afford a higher out-of-pocket expense in case of an accident, increasing your deductible can lower your monthly premiums.
4. Take Advantage of Discounts: Ask about discounts for safe driving, low mileage, good grades (for students), or vehicle safety features.
5. Improve Your Credit Score: In many states, insurers use credit-based insurance scores to determine rates. A better credit score could lead to lower premiums.
6. Consider Usage-Based Insurance: Some companies offer programs that track your driving habits and reward safe driving with lower rates.
7. Review Your Coverage: As your car ages, you might be able to drop certain types of coverage, like comprehensive or collision, if the car’s value has significantly decreased.

The Road Ahead: What to Expect

While it’s difficult to predict exactly how insurance rates will trend in the future, it’s clear that the factors driving up costs aren’t going away anytime soon. Rising repair costs, more expensive vehicles, and the increasing frequency of severe accidents are likely to keep pressure on insurance rates.

However, as a consumer, you’re not powerless. By staying informed, shopping around, and making smart choices about your coverage, you can help mitigate the impact of these rising costs on your budget.

Remember, before you buy your next vehicle, research what you can expect to pay to insure it. Insurance costs should be a key part of your decision-making process when choosing a new car.

Don’t wait for your next renewal to start saving. Reach out to The Bill Yon Agency today and discover how we can help you secure better coverage at more competitive rates. Your wallet—and your peace of mind—will thank you!