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Why car insurance rates are going up

Have your car insurance premiums been going up? You’re not alone. Auto insurance premiums have been climbing for about a decade now. Here’s a look at how much car insurance costs are increasing, why car insurance costs are going up and what you can do about it.

The Increase in Car Insurance Rates

The cost of car insurance has increased steadily since around 2010.

According to the Insurance Information Institute, data from the National Association of Insurance Commissioners shows that the average expenditure on auto insurance was $786.65 in 2009. In 2018, the most recent year for which data is available, the average expenditure was $1,056.55.

Between 2010 and 2011, modest increases were seen. Then, between 2012 and 2015, rates experienced a sharper increase of between 3.1 and 3.5 percent. Between 2016 and 2018, rates increased even more sharply, with increases of 5.0 to 6.5 percent.

  • 2009: $786.65 (down 0.5 percent)
  • 2010: $789.29 (up 0.3 percent)
  • 2011: $795.01 (up (0.7 percent)
  • 2012: $812.40 (up 2.2 percent)
  • 2013: $841.06 (up 3.5 percent)
  • 2014: $869.47 (up 3.4 percent)
  • 2015: $896.66 (up 3.1 percent)
  • 2016: $945.02 (up 5.4 percent)
  • 2017: $1,006.33 (up 6.5 percent)
  • 2018: $1056.55 (up 5.0 percent)

COVID’s Impact on Auto Insurance Rates

The COVID-19 pandemic may have given drivers a slight respite from rising car insurance premiums. According to Insurance Journal, recent data shows that auto insurance rates in the U.S. decreased by an average of 1.7 percent, and drivers in some states experienced even greater savings.

These rate decreases are attributed to the fact that fewer people were driving during the pandemic. As the miles driven dropped, claims could be expected to drop as well. Many auto insurers offered rebates and discounts to make up for the drop in driving. The Insurance Information Institute estimates that U.S. auto insurers returned more than $10 billion to their customers.

As the pandemic and associated restrictions ease and people return to their normal driving habits, COVID’s impact on car insurance premiums should decrease. Despite this recent drop in rates, overall, auto insurance rates have been climbing upward for years now, and this trend may continue in the future.

Why Are Insurance Companies Raising Premiums?

Although some increase would be expected simply because of inflation, the increase in the cost of auto insurance has outpaced inflation in the last decade. This means that other factors must be at play.

Multiple factors can impact car insurance premium rate increases, but two factors stand out: traffic fatalities and repair costs.

Dangerous Driving and Traffic Fatalities

Traffic fatalities have surged in an alarming trend.

Based on data from the Insurance Institute in Highway Safety, traffic deaths dropped starting around 2008 and remained at lower levels until around 2015. At that point, traffic deaths began to rise again, and despite a slight decrease in 2018 and 2019, they have remained at a higher level. This increase correlates fairly well with the increase in auto insurance rates.

In 2020, traffic deaths should have decreased dramatically due to the sharp drop in driving, but early data suggests that this is not what happened. According to the National Safety Council, traffic deaths increases 24 percent in 2020, reaching the highest level in 13 years.

These are the traffic deaths per year based on data from the Institute of Highway Safety and (for 2020) the National Safety Council:

  • 2006: 42,708
  • 2007: 41,259
  • 2008: 37,423
  • 2009: 33,883
  • 2010: 32,999
  • 2011: 32,479
  • 2012: 33,782
  • 2013: 32,894
  • 2014: 32,744
  • 2015: 35,485
  • 2016: 37,806
  • 2017: 37,473
  • 2018: 36,835
  • 2019: 36,096
  • 2020: 42,060

The rise in traffic fatalities can be blamed on several root causes. One key issue is that the number of cars on the road has increased, along with the number of miles driven. The Federal Highway Administration shows that 3.23 trillion miles were driven in the U.S. in 2019, up from 3.00 trillion in 2006 and 2.70 trillion in 2000.

However, many people have also pointed to dangerous driving habits as a key reason for rising fatalities.

Distracted driving has been a growing problem. Distractions can come in many forms, and drivers can be distracted by anything: passengers, music, food, etc. However, smartphones are an especially dangerous distraction because they often require use of the driver’s eyes, hands and attention. Many people do not think it’s a coincidence that traffic deaths began to rise around the same time that smartphones became common. The NHTSA says that distracted driving claimed 3,142 lives in 2019.

During the pandemic, there were also reports of reckless driving and speeding. According to the Governors Highway Safety Association, as the roads emptied because of the pandemic, state highway safety officials in multiple states reported a surge in speeding. In many states, officials reported an increase in vehicles going 100 miles per hour or more. Although crash rates appeared to have decreased because of the drop in traffic, early evidence suggested that the number of serious crashes appeared to increase, and pedestrian fatalities also appeared to increase.

New Car Tech and Expensive Repairs

New car tech is supposed to help keep prevent traffic fatalities. However, the recent increase in traffic deaths proves that new car tech cannot prevent all crashes. In some cases, drivers may rely on vehicle safety tech too much. This means that crashes may actually be more likely to occur under certain circumstances.

When crashes do occur, expensive car tech can raise the price of repairs substantially. Take front bumper repairs as an example. According to Consumer Reports, a basic bumper repair might run between $700 and $1,800. When you have to tack on sensor and camera replacements, you’ll need to add about $500 to $1,900. Recalibration can cost an additional $250 to $600. This means that a bumper with advanced safety technology could cost more than twice as much to fix after a crash.

And that’s just for the bumper. Other repairs – including headlights, taillights, windshield replacement, rear bumpers and side mirror replacement – can also cost much more when advanced safety systems are involved. A standard side mirror might cost $300 to $500 to replace, while a mirror with ADAS could cost $1,000 to $2,500, and recalibration can add $250 or more.

The increase in repair costs can impact insurance premiums. Additionally, because cars can be so much more expensive to repair, more cars may be declared a total loss after a crash, and this may drive up car insurance premiums even more.

Other Factors That Impact Auto Insurance Premiums

Data on annual rate increases can tell us about nationwide trends in auto insurance costs. Your individual car insurance premiums will be affected by these trends, but personal factors will impact your rates even more.

If you want to take control of your car insurance rate, try looking at premiums from the point of view of an insurance company. Auto insurers look at many different things when determining rates, including:

  • Your age
  • Your driving record
  • Your ZIP code

Although you can’t control your age, and you may not be willing to move just to get cheap auto insurance, you can improve your driving history by driving carefully and avoiding crashes and tickets.

Your auto insurance selections also impact your rates. States typically require liability auto insurance, and some states require additional coverage types, as well. You can choose to get more coverage types than are legally required, and you can also choose to increase your limits.

This provides you with more protection, but it will also increase your premiums. Policies with a higher deductible will also usually come with a lower premium, but if you ever have to file a claim, you will need to pay more out of pocket.

A Proactive Solution

Higginbotham is an independent insurance agency with deep expertise and access to many of the nation’s top auto insurance carriers. Allow us to shop the market on your behalf to identify the best coverage and rates for your unique situation. Contact us for a complimentary quote today.

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