Here’s why you’re paying so much more for car insurance


While overall inflation has come down, insurance premiums haven’t

In January, the Bureau of Labor Statistics reported that the cost of auto insurance had increased nearly 21% over the last 12 months. Meanwhile, the overall rate of inflation was 3.4%.

That’s quite a gap and it is leaving consumers asking what is going on.

“GEICO has been increasing my auto insurance by 20% every six months without a reason,” Mark, of Huntington Station, N.Y., wrote in a ConsumerAffairs review. “I have a perfect driving record for 30 years.”

Hugh Allen is principal product strategist at Hi Marley, a platform that allows insurers to connect and collaborate with policyholders via text. Allen says insurance companies have raised rates, in part, because accident frequency and severity have increased.

“In addition, when coupled with increased frequency and severity, the impact of inflation is being felt by auto insurers via increased vehicle repair parts and labor costs, rental car costs for first and third-party claimants, and injury-related costs, such as medical bills,” Allen told ConsumerAffairs. “These costs ultimately get passed to consumers in the form of increased auto insurance premiums.”

Repair costs have gone up

Gregg Barrett, CEO of Waterstreet Company, an insurance software company, says other factors are also driving up insurance costs – notably the increased cost to repair a damaged vehicle.

“Today's cars are equipped with advanced technology and expensive parts, including sensors and cameras, which drive up repair bills significantly when damaged,” he told us. “Additionally, the escalating cost of medical care also impacts car insurance rates. Injuries from auto accidents often require medical treatment, and as these costs increase, so do the claims that insurance companies need to pay out.”

In other words, it’s a snowball effect. Inflation in other sectors raises costs for insurance providers. But overall inflation appears to be easing at a much faster rate than for insurance premiums.

How to lower your rate

So, is there anything consumers can do to lower their rates?

Bryan Davis is executive vice president head of VIU by HUB, which helps consumers compare insurance rates. He says comparing rates usually helps you find a better deal.

“People can save money on car insurance by working with an independent insurance broker who can provide quotes from multiple carriers alongside neutral and personalized advice on coverage needs,” Davis told us. “Shopping around and reevaluating coverage annually is critical and working with a broker can help people reassess their needs as their life and the economy changes.”

Many major car insurance companies now offer a program that, if you allow them to monitor your driving, you can get discounts if you are considered a safe driver. Barrett says these programs can save you money, but there are many things to consider.

“Participating in such programs means sharing detailed data about one's driving habits and locations with the insurance company,” Barrett said. “Consumers must weigh the potential savings against their comfort level with sharing personal driving data, understanding how this data will be used, and ensuring their privacy is protected.”

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