For the past year or so, eggs and housing costs have been some of the nation’s inflationary hot buttons. Auto insurance can be added to the list as well.
According to a Bankrate.com study of comprehensive policies, drivers are now paying an average of $2,014 per year (which cover risks in addition to collisions such as vandalism and windscreen damage). Based on what Americans earn, that amounted to a 2.9% cut in the average household income in the United States. According to the study, insurance premiums increased 13.7% nationally over the previous year.
According to the study, rising costs have been especially noticeable in certain areas, such as Orlando, where premiums have risen 22.6% on average over the last year, and metro Phoenix, where premiums have risen 17.3%. According to the report, drivers in areas such as Miami and Tampa are now paying more than 5% of their income for insurance premiums, with Detroit only slightly better at 4.8%.
Car insurance is less expensive when compared to income.
According to a Bankrate.com study, auto insurance is extremely affordable in comparison to incomes in and around Boston, Seattle, and Washington, D.C. — each between 1.3% and 1.5% or so.
Just as you might shop around for food or an apartment, now is a good time to get a few more auto-insurance quotes if you haven’t done so recently, especially if your driving habits, credit scores, or other factors have changed.
Inflation raises insurance costs.
Inflation is the primary cause of rising auto insurance prices or premiums, with costs for mechanics, other types of labour, repair parts, and other items rising. “The numbers really come down to inflation,” Deventer explained.
She believes that more premium increases are likely, as insurers are requesting higher rates from state insurance departments that reflect price levels in 2022, when inflation was slightly higher than it is now.
Mechanics, warehouse workers, drivers who deliver parts to repair shops, and people in a variety of other roles are being paid more. Rising labour costs affect “everything from the creation and installation of that bumper to the paint that is being applied to it,” according to Jeff LaScala, president of Coverage Pro in Sun City West, Arizona.
Rising accident claims have an impact on car insurance premiums as well.
The frequency and severity of claims, of course, have an impact on auto insurance premiums. While the long-term trend has been favourable in many ways, collisions are on the rise again following a pandemic slowdown during which many workers did not need to commute to work.
“After decades of decline, traffic deaths have increased in the last several years due to riskier driving behaviours — more speeding, driving while intoxicated, not wearing seat belts, distracted driving,” writes the Insurance Information Institute in a commentary.
According to the National Highway Traffic Safety Administration, traffic deaths in the United States will reach a 16-year high in 2021, with nearly 43,000 deaths, according to the group.
Repair costs are rising as collisions increase, supplies try to catch up, and more sophisticated and expensive parts are being installed in each vehicle, according to LaScala. He also mentioned that the sensors in the windscreen system might require microchips and calibration.
Catalytic converter thefts are on the rise.
There are also emerging repair issues, such as the increased theft of catalytic converters for their precious metal content. LaScala claims that with the right tools, two experienced thieves can steal a converter in less than two minutes. He added that thieves may only receive $25 to $100 for selling a converter to a scrap yard, whereas motorists may have to spend $1,100 or more to replace one.
In this context, auto insurers appear to have underestimated the effects of the pandemic and its aftermath. According to the Insurance Information Institute, when accidents began to decline early in the pandemic, insurers returned $14 billion in refunds and account credits to customers. However, losses have surpassed pre-pandemic levels, and premiums are expected to rise “significantly” in the coming years, according to the organisation.
Your insurance premium may rise if you cause an accident. Adding a teen driver to your policy would be the same. Even a significant drop in your credit score could be detrimental. According to the Bankrate study, most states allow insurers to use credit scores to set premiums because drivers with lower scores are statistically more likely to file claims. According to the report, premiums for people with bad credit were nearly double those for people with good credit.
According to Bankrate, California, Hawaii, and Massachusetts are among the few states that limit the use of credit in determining auto insurance premiums. Nevada has imposed a temporary prohibition on the practise.
How to Reduce Your Premium
However, several factors can lead to lower premiums, making comparison shopping worthwhile. The Insurance Information Institute recommends obtaining quotes from at least three different insurers.
You may also be able to reduce your premium by reducing coverage on older vehicles that may not be worth as much as you believe. Among other cost-cutting ideas, you could look for a low-mileage discount if you don’t drive frequently, install an anti-theft device, compare premium costs before purchasing a specific vehicle, and combine your homeowners and auto insurance policies with the same company.
If you can afford to pay more directly for repairs, consider raising your deductible from $200 to $500 or even $1,000. According to the institute, these increases could result in premium reductions of at least 15% and up to 40% or more for collision and comprehensive policies.
Insurance companies offer lower premiums to good drivers. If you’re willing to demonstrate your driving habits, Deventer suggests looking for discounts tied to various telematic devices.
