Are Car Insurance Rates Going Up?

In today’s rapidly evolving automotive landscape, one question remains at the forefront of every driver’s mind: are car insurance rates going up?

Are Car Insurance Rates Going UpCourtesy:(Moneycontrol)
Are Car Insurance Rates Going Up

Many drivers may be wondering if car insurance rates are going up in 2023.

The answer is yes, according to several reports and sources.

Car insurance rates are expected to increase by an average of 8.4% across the U.S. in 2023, the largest rate increase in six years, according to a report from research firm ValuePenguin.

The average cost of full coverage car insurance is expected to be $1,780 per year, but rates will vary dramatically between states, the report found.

What Factors Are Driving Up Car Insurance Rates?

There are several factors that are driving up car insurance rates in 2023, such as:

  • Inflation: Inflation is the general increase in the prices of goods and services over time. Inflation affects the costs of car repairs, medical bills, legal fees, and other expenses that are involved in car insurance claims. Inflation also affects the costs of new and used cars, which affect the value of vehicles and the amount of coverage needed. According to the U.S. Bureau of Labor Statistics, vehicle repair costs were up almost 20% this May compared to the previous year, and the average cost of a used car was 44% higher than it was five years ago.
  • Pandemic aftermath: The COVID-19 pandemic had a significant impact on the car insurance industry in 2020 and 2021. Due to lockdowns and travel restrictions, there was a sharp decline in driving and traffic accidents, which led to lower claims and losses for insurers. Many insurers offered refunds, discounts, or credits to their customers to reflect the reduced risk. However, as people started going back to work and traveling more in late 2020 and 2021, there was a significant increase in the number of accidents on the road in the U.S. According to the National Highway Traffic Safety Administration, traffic deaths reached a 16-year high in 2020, with speeding-related crashes jumping 11% and alcohol-related crashes climbing 9% from 2019. The increased claims and losses have forced insurers to raise their rates to cover their costs and maintain their profitability.
  • Climate change: Climate change is the long-term change in the Earth’s climate patterns due to human activities and natural causes. Climate change affects the frequency and severity of natural disasters, such as hurricanes, floods, wildfires, hailstorms, and tornadoes, which can cause extensive damage to vehicles and property. According to the Insurance Information Institute, natural disasters caused $95 billion in insured losses in the U.S. in 2020, the highest amount on record. The increased risk and uncertainty of natural disasters have prompted insurers to raise their rates to account for the potential losses and payouts.
  • Reinsurance cost increases: Reinsurance is insurance for insurers. It is a way for insurers to transfer some of their risk and liability to another company or entity in exchange for a fee or premium. Reinsurance helps insurers reduce their exposure to large or catastrophic losses and stabilize their financial performance. However, reinsurance costs have also increased due to inflation, pandemic aftermath, climate change, and other factors. According to a report from Willis Re, a leading reinsurance broker, reinsurance rates increased by an average of 10% across all regions and lines of business in 2021. The increased reinsurance costs have also contributed to the increased car insurance rates for consumers.

How Can You Save Money on Car Insurance?

While car insurance rates are going up in 2023, there are still some ways that you can save money on your car insurance premium, such as:

  • Shop around: One of the best ways to save money on car insurance is to shop around and compare quotes from different insurers. You can use online tools such as FindLaw, Super Lawyers, or Justia to search for car insurance companies by location, coverage options, ratings, reviews, and other criteria. You can also contact your local or state bar associations such as the Texas Bar Association or the Criminal Lawyers’ Association to get referrals or recommendations for car insurance companies. You should compare at least three quotes from different insurers before making your decision.
  • Bundle your policies: Another way to save money on car insurance is to bundle your policies with the same insurer. For example, you can combine your car insurance with your home insurance or renters insurance or life insurance or health insurance or any other type of insurance that you have. By bundling your policies, you can get discounts from your insurer and simplify your billing and payment process.
  • Raise your deductible: A deductible is the amount of money that you have to pay out of pocket before your insurer pays for your claim. By raising your deductible, you can lower your premium because you are taking on more risk and responsibility for your claim. However, you should make sure that you can afford to pay your deductible in case of an accident or a loss.
  • Lower your coverage: Another way to lower your premium is to lower your coverage. You can reduce or eliminate some of the optional coverages that you may not need or use, such as collision coverage, comprehensive coverage, rental car reimbursement, roadside assistance, or gap insurance. However, you should not lower your coverage below the minimum required by your state or below the amount that you need to protect yourself and your assets in case of a lawsuit.
  • Improve your credit score: Your credit score is a measure of your financial responsibility and trustworthiness. It is based on your credit history, which includes your payment history, credit utilization, credit mix, credit age, and credit inquiries. Your credit score can affect your car insurance rate because insurers use it as a factor to determine your risk level and likelihood of filing a claim. By improving your credit score, you can improve your car insurance rate because you can show your insurer that you are a reliable and responsible customer. You can improve your credit score by paying your bills on time, keeping your credit card balances low, diversifying your credit accounts, and checking your credit reports for errors.

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