Auto insurance up 20.6% in year, outstrips inflation

The only thing going faster than the driver in the lane next to you is the price increases for insuring your car.

Auto insurance rates climbed 1.4% in January and are now up a staggering 20.6% over the past year, according to federal inflation data.

Auto insurance inflation is so high that it is now running at more than twice the rate of any other category of inflation tracked by the government, including food, energy, clothes, new and used cars, medical services and rent. And auto insurance inflation remains stubbornly high even as the overall inflation rate continues to gradually fall toward the Federal Reserve’s 2% target.

“There’s a myriad of reasons for it,” said Brian O’Connell, insurance analyst for InsuranceQuotes.com. “It’s bad across the board.’’

Used car prices have started to come down, but the costs of car parts, labor and medical services continue to rise, Root CEO Alex Timm told analysts on the auto insurer’s most recent conference call to discuss the company’s financial performance.

How bad is it?

The average cost of full coverage car insurance rose to $2,543 nationwide in 2024, a 26% increase over the past year, according to a new Bankrate study.

O’Connell pegs rate increases of about a third since 2019, and for some drivers it’s been 50%, O’Connell said. Owners of electric vehicles pay about 25% more.

Based on median household income of $74,580, the typical household spends 3.4% of its income on auto insurance, Bankrate said.

In Ohio, one of the lower cost states for auto insurance, the bill is $1,514, or 2.3% of the median household income.

Why are rates going up?

Auto insurance has gone up so much because everything that it covers has increased so much, O’Connell said. That includes more expensive new and used cars, higher costs for parts, parts shortages, higher labor costs, more frequent accidents, car rental costs and an increase in the number of stolen cars.

Used car prices, for example, are about 20% higher than they were in 2019, he said.

“We aren’t going to go grab these costs,” O’Connell said of insurers. “The customer is.’’

Speeding and distracted driving have led to more accidents and more costly accidents, said Kirt Walker, Nationwide’s CEO.

Consumer groups have added another factor behind higher rates: CEO pay and corporate greed given that rate increases have far exceeded the inflation rate.