Why Are Auto Insurance Premiums Going Up and What Can I Do About It?
If you’re like most people, you’re probably asking yourself:
- Why are car insurance rates going up?
- Is there anything I can do to lower my auto insurance rate?
In this article, we’ll discuss factors affecting the market and ways to help lower your auto insurance rate. We’ll also explain how optional coverage packages could help reduce out-of-pocket claim expenses.
Travelers Auto Industry Trends Infographic
Headline:
The many factors driving auto insurance rates
Subhead:
Inflationary pressures and shortages are contributing to the rising costs to repair and replace vehicles. Here are some of the factors that may affect premiums moving forward.
Stats:
15 separate $1B+ loss events from weather as of Oct 11, 20221
Used car and truck prices up 7.2%; new vehicle prices up 9.4% Sept ‘21 - Sept ‘222
Supply chain issues have triggered shortages of chips — and new cars3
High severity in auto accidents; number of fatal car crashes is up 15%, 2022 compared to 20204
There are labor shortages,5 and wage increases are up 8.5%, Q1 ‘22 over Q1 ‘216
Vehicles: bodywork costs up 12%, repairs up 15%, Nov ‘21 compared to Nov ‘227
Annotations:
1 NOAA National Centers for Environmental Information (NCEI), U.S. Billion-Dollar Weather and Climate Disasters (2022), https://www.ncdc.noaa.gov/billions/;
2 U.S. Bureau of Labor Statistics, October 19, 2022, https://www.bls.gov/opub/ted/2022/consumer-prices-for-shelter-up-6-6-percent-for-year-ended-september-2022.htm;
3 Chip Shortages Still Plague Toyota, Some Other Auto Makers, November 1, 2022, https://www.wsj.com/articles/chip-shortages-still-plague-toyota-other-auto-makers-11667280514;
4 National Safety Council (NSC), https://injuryfacts.nsc.org/motor-vehicle/overview/preliminary-monthly-estimates/;
5 TechForce, https://techforce.org/techforce-releases-2022-technician-supply-demand-report/;
6 U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages, General Automotive Repair, 1Q21-1Q22;
7 U.S. Bureau of Labor Statistics, Jan-Nov 2022, https://www.bls.gov/news.release/pdf/cpi.pdf.
Legal Footer:
The Travelers Indemnity Company and its property casualty affiliates. One Tower Square, Hartford, CT 06183
© 2023 The Travelers Indemnity Company. All rights reserved. Travelers and the Travelers Umbrella logo are registered trademarks of The Travelers Indemnity Company in the U.S. and other countries.
PL-19031 Rev 1-23
Why Are Car Insurance Rates Going Up?
There are many reasons for the current auto insurance rate increases across the market. Here are some of the notable ones.
Severe Accidents
There was a rise in the severity of automobile accidents between 2020-2022. In fact, fatal car crashes were up 15% in 2022 as compared to 2020.1
Increased Vehicle Value
Another contributor affecting the auto insurance market: the value of most vehicles — both new and used — increased while supply decreased. As of September 2022, used car and truck prices went up 7.2% and new vehicle prices were 9.4% higher when compared to September 2021.2
More expensive cars (and parts) also make repairs and replacements costlier. When comparing November 2022 to November 2021, bodywork costs rose 12% and repair costs grew by 15%.3
Vehicle supply dropped in large part because key materials like semiconductors, which are needed for the computers found in cars today, experienced a manufacturing interruption in recent years. Although manufacturing has resumed, the supply for some vehicle manufacturers still runs short of demand.4
Additional Factors That Could Impact Auto Insurance Rates
There are other factors not related to national and global events that could raise your auto insurance rates:
- If you’ve made claims on your policy in the last year.
- If you or anyone on your policy received a speeding ticket or other driving citations.
- A higher number of claims in the area you live in indicates there may be more accidents related to weather changes, higher theft rates, more incidents of vandalism or other issues the insurer must cover.
- If you moved to a higher-risk area than you previously lived in.
- You may have taken advantage of insurance discounts in the past that you no longer qualify for.
What You Can Do to Reduce Your Insurance Rates
While some insurance price increases are out of your control, there are things you can do to help get them in check:
- Practice safe and sound driving habits. Make sure everyone on your policy follows all the rules of the road and drives carefully, especially in difficult conditions and bad weather. This will help avoid tickets and accidents that could hike up your premium prices.
- Sign up for telematics. If you and the people on your policy drive safely and carefully, why not use it to save money? Telematics collects information about your driving habits in real time. By enrolling in a telematics program like IntelliDrive® from Travelers, you could save on your car insurance policy’s first term. At renewal, safe driving habits can lead to savings, though riskier driving habits may result in a higher premium.**
- Change your preferences to be a digital customer. There can be a reduction in premiums if you engage digitally. These savings are given when you enroll in a paperless option for policies and bills and register with the carrier’s application. Travelers offers a Digital Auto Discount† for customers who go paperless, register on our application and enroll in IntelliDrive®.***
- Review coverage. If you haven’t checked your auto insurance and other coverage lately, review it with your independent insurance agent or a Travelers representative. They might offer some ideas on how you can make your coverage more affordable.
- Raise your deductible. Often, increasing your deductible can help lower premiums. However, remember that you’ll be responsible for the deductible out of pocket and must always have enough cash on hand to cover your deductible if you need to make a claim.
- Look for discounts. Check to see if you’re eligible for discounts like multi-policy (bundling), EFT (Electronic Funds Transfer)† or Good Student. Your independent agent or Travelers representative can help you find ways to save.
Get the Most Out of Your Auto Coverage
In addition to typical coverage, find out if your carrier provides added advantages for safe drivers. For example, Travelers offers:
- Premier Responsible Driver Plan®, which can lower your deductible by $50 – $100 upon renewal, with a maximum reduction of $500, when you drive without an accident or major violation. This plan also offers accident forgiveness, which allows you to have a single accident within a certain time period without an increase in insurance costs.‡
- Premier New Car Replacement®, which can cover the cost to replace your new vehicle with a brand- new vehicle of the same make and model if yours is totaled in the first five years of ownership.
- Premier Roadside Assistance®, which can provide added roadside benefits if you have car issues, such as a dead battery, and find yourself stranded.§
Travelers also provides other ways to save that you could be eligible for, such as incident leniency, youthful driver leniency and longevity credits.
The Bottom Line
Talk to your local independent agent or Travelers representative to learn more about car insurance and money saving discounts.
Sources
1 https://injuryfacts.nsc.org/motor-vehicle/overview/preliminary-monthly-estimates/
2 https://www.bls.gov/opub/ted/2022/consumer-prices-for-shelter-up-6-6-percent-for-year-ended-september-2022.htm
3 https://www.bls.gov/news.release/pdf/cpi.pdf
4 https://www.wsj.com/articles/chip-shortages-still-plague-toyota-other-auto-makers-11667280514
More Prepare & Prevent
5 Questions to Ask Your Car Insurance Rep
These five questions are important to ask a car insurance representative before deciding on a policy.
10 Ways to Save on Your Car Insurance
Car insurance is a necessary expense for many people, and there are a variety of ways to save. Here are 10 ways to save on your car insurance.
Telematics: 5 Reasons You Should Try "Pay How You Drive" Car Insurance
With the ongoing development of technology in cars to help us drive safely, there is an opportunity to help raise awareness of your driving behaviors.