Everything seems to be getting more expensive lately, and auto insurance is no exception. According to Forbes Advisor, the cost of auto insurance went up more than 17% from July of 2022 to July of 2023. Here are some reasons why auto insurance rates are going up, along with what you can do to help manage your car insurance premium increase.
Some reasons for an auto insurance rate increase
During the global pandemic that started in 2020, federal and local governments enforced shelter-in-place and social distancing guidelines. We then saw fewer accidents and less expensive losses, due to there being fewer cars on the road with schools being virtual and many companies allowing their employees to work from home.
But now, a few years after the pandemic, roads are busy again, many people are working in-office and schools are back to in-person learning. This resulted in an increase of car accidents and injuries, which has caused car insurance rates to rise.
Rising car repair costs
Supply chain disruption and labor issues that started during the pandemic and continue to this day, have impacted vehicle repair costs. This includes longer times to repair a car involved in an accident. As a result, there are additional costs associated with policyholders using a rental car for longer while they wait for their car to be repaired.
Additionally, new technology, such as parking sensors, lane-departure warnings, and better battery technology, have added to the rising cost of repairs. While those smarter sensors and stronger devices can help improve safety, they are also more expensive to repair.
Electric vehicles
The ownership and use of hybrid and electric vehicles in the U.S. has become more popular in the last few years, rising to 16.3% of sales in 2023 compared to 12.9% of sales in 2022. Electric vehicles help the environment by producing less gas emissions, but they are more expensive to acquire, repair, and replace, which can contribute to the increase of insurance rates.
Increased accidents due to distracted driving
According to a State Farm survey, 67% of drivers said reading or sending texts while driving is distracting/very distracting, and over 70% of drivers report watching a video or recording video (67%) to be distracting/very distracting. Even voice-activated car commands can divert cognitive abilities and attention. Rethink using the phone while driving, and avoid being tempted by other driving distractions. If you have a teen, talk with them about safe driving habits. NHTSA research has found that the risk of accidents in teens is 23 times more likely when they are texting and driving.
Weather catastrophes
The U.S. experienced many weather disasters during 2023, several of them causing at least $1 billion in losses, according to Climate.gov. Among the weather catastrophes that our country encountered in 2023 were wildfires in Maui, Hawaii, historical floods in California, and tropical cyclones. When severe weather strikes, it impacts the insurance industry and premiums can be affected. For example, State Farm paid $12 billion in catastrophic claims during 2023, compared to $7 billion paid in catastrophic claims during 2022.
We encourage you to learn more and discuss your unique needs with State Farm Agent Regina Talbot at (626) 357-3401.
