Auto insurance rates are rising. Here’s how you can save


Have you received a notice that your auto insurance rate is up? Just about everything costs more these days, so it’s no surprise that auto insurance premiums are likely to rise for drivers nationwide. Allstate Protection auto insurance increased by 8.7%, on average, in the second quarter of 2022 in 30 states. State Farm was recently approved for rate hikes in 17 states and other insurance companies are following suit. Rates will likely continue to rise in 2023.

In large part, you can thank inflation and supply chain disruptions for the premium hikes. However, market conditions are not solely responsible for the rise in rates. Reckless driving has increased the number of fatal car accidents, making roads more dangerous and insurance premiums more expensive for everyone. For that, you can thank smartphones.

See how you can get a low insurance rate despite skyrocketing prices.

Here’s why your car insurance rates are going up

When it comes to calculating car insurance premiums, driving records are also the insurance companies looking at the big picture – from overall market performance to crime rates and driving statistics by State.

Inflation raises prices in all areas. The consumer price index rose by 8.5% in March 2022, and we see this increase reflected in the rising cost of replacement auto parts and repair labor. Treating injuries after an accident and paying lawyers to sue for pain and suffering also becomes more expensive. Insurance companies raise their rates so they can afford to cover your losses, injuries and legal expenses after an accident.

Global chip shortages are driving up the cost of new cars. Shortages of semiconductor chips needed to make new car models have slowed production at a time when demand is still strong. When demand exceeds supply, prices go up.

According to Kelley Blue Book, a California-based automotive research firm, the average cost of a new car has soared to $48,301 in August 2021 – a record after five months of increases and 10.8% more than a year ago. Since car insurance reimburses for the replacement of your car in the event of an accident, rates increase to keep pace with market prices.

Qualified automotive technicians are also rare. Not all mechanics are qualified to work on newer models, which are essentially computers on wheels. Automotive engineers who know how to service new models may charge higher prices for their expertise, increasing insurance costs that cover repairs after an accident.

Motor vehicle deaths are on the rise. The National Highway Traffic Safety Administration reported about 9,560 car accident deaths in the first quarter of 2022 – an all-time high for first quarter deaths since 2002. A higher number of fatal accidents leads to higher insurance premiums to cover compensation.

Catalytic converters are prime targets for theft. Reports of catalytic converter thefts have surged 325% nationwide between 2019 and 2020, with California being the most affected. State Farm paid more than $33.7 million reimbursement of claims to customers between July 2020 and June 2021.

If your ZIP code has a history of car theft and vandalism, your insurance company will likely increase your insurance premiums because your car’s catalytic converter is more likely to be a target of theft.

Rates are up, but you can still save on car insurance

Insurance rates will likely remain elevated until supply chains and consumer prices return to comfortable levels. Still, there are ways to save on car insurance. Specifically, consumers can drive more safely and purchase a cheaper policy. If credit scores are a scoring factor in your state, improving your credit rating will also lower your insurance premiums.

A good driving record goes a long way in keeping car insurance premiums affordable. Every time you receive a ticket for a moving violation or are involved in a car accident, your insurance company will add a premium to your policy, even if the other driver was at fault.

Avoiding these surcharges altogether is your best bet for paying the cheapest fares. You can even get a discount if you avoid accidents and moving violations for three to five years. In California, drivers must be offered a 20% discount if their driving record has one point or less in the last three consecutive years.

Parking in a garage and adding locks to your car will lower prices for city dwellers. If you park on the street, consider parking in a covered, secure car park instead and/or adding a security feature to prevent car theft. According to the USDA’s Economic Research Service, car insurance rates in urban areas are about 39% higher, due to factors such as theft and vandalism, so show your insurer that you are proactive about ensure the safety of your car.

If you want your safe driving habits to pay off, consider signing up for your insurer’s telematics programs. Insurers calculate discounts for customers who sign up for the program that tracks their driving data (usually via a mobile app) and analyzes driving habits, such as speeding and hard braking, mileage and hours spent driving. conduct. The more cautious the driver, the higher the discount.

Below are the telematics programs offered by major national insurance companies:

  • Allstate DriveWise
  • KnowYourDrive by American Family
  • Farmers signal
  • Liberty Mutual Right Track
  • MercuryGO by Mercury Insurance
  • State Farm Drive Safe & Save
  • IntelliDrive Travelers

Shopping around is the best way to ensure you’re paying the cheapest fares available. Different insurance companies have different underwriting policies, and some underwriting factors carry more weight than others. One insurer may offer you a cheaper rate than another – and for the same coverage.

Calling insurance companies one by one to get quotes can be a tedious task. Fortunately, insurance marketplaces like SmartFinancial allow you compare quotes from multiple insurers by completing a quick questionnaire.

Will auto insurance rates ever come down?

Market trends are constantly changing, so auto insurance rates may drop in the future, especially depending on geography: if claims are down in your state, expect insurers to cut rates . On the other hand, a spike in claims will likely result in higher premiums for everyone. Also, as inflation subsides and other market factors stabilize, auto insurance rates may decline generally, fingers crossed.


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