Consumers get no relief from rising auto insurance rates
NEW YORK — Relentlessly rising auto insurance rates are squeezing car owners and stoking inflation.
Auto insurance rates rose 2.6 percent in March and are up 22 percent from a year ago. Premium costs have been marching steadily higher since 2022, even as inflation at the consumer level steadily cooled from its 9.1 percent peak in the middle of that year. Consumers have had some relief as the rate of cost increases for food and energy, two key components of most budgets, has eased greatly.
But auto insurance and car ownership costs have become a sticking point for consumers and the Federal Reserve in its battle to rein inflation back to its goal of 2 percent.
Typically, individuals would see a noticeable increase in their premiums because of speeding tickets and other moving violations. Adding new drivers or a general increase in claims in the area were other reasons.
But the persistent rise in rates over the past two years has been far more sweeping. New vehicle prices started spiking during the pandemic, mainly because of a worldwide shortage of computer chips amid production cuts and supply chain bottlenecks. Dealers spent much of 2021 with few or no cars in stock.
More tech, higher costs
Higher value for cars, with more advanced technology and intricate parts, has raised the overall cost of repairs. Overall maintenance and repair costs jumped
8.2 percent in March from a year ago, according to the U.S. Bureau of Labor Statistics. That has eased a bit over the last year.
“The severity is really the thing that has influenced rates more over the last two years than anything,” said Greg Smolan, vice president of insurance operations at AAA Northeast. “A fender bender in the past didn’t have all the sensors and cameras.”
Higher overall auto prices and auto repair costs prompted insurers to start raising premiums as overall car values jumped. Price increases for insurance rates, like many other increases from food to clothing, have been sticky and are less likely to drop at the same rate as broader inflation, if at all.
Shop around
Obtaining auto insurance can be confusing and overwhelming, considering the differing mix of requirements in each state, extra options and the confusing industry and legal jargon used by insurers. The first step for many should be gaining a better understanding about auto insurance, according to the Insurance Information Institute.
Consumers should shop around by getting at least three different quotes from different types of insurance companies. Also, comparing costs before buying a car could help give consumers a better sense of the true cost of owning a specific car. Premiums are based in part on a car’s price, with prospective repair costs and safety data.
Deductibles could be a major factor in determining monthly premium costs. That’s the amount of money that a driver is responsible for paying toward a claim. Higher deductibles usually mean lower premiums.
Bundling multiple policies under one insurer could come with a discount. This is common for homeowners using the same company for their home and auto policies. There may also be discounts for insuring more than one vehicle under the same company.
Defensive driving courses also help give drivers discounts on insurance.
The timing and standards vary by state, but courses are usually offered in-person and online. Companies including Progressive and Geico often offer multiyear discounts for taking such a course. They can usually steer policy holders toward reputable companies offering the course and certificate.