You may have received your latest bill and asked yourself, “why did my auto insurance rates go up?”
Auto insurance premiums are expected to increase by 8.4% in 2023, according to The State of Auto Insurance in 2023 report by ValuePenguin, the highest rate increase since 2017.
If you haven’t made a claim recently or have a near-perfect driving record, it might not make sense. But rate increases are an inevitable part of having auto insurance. There are many reasons why premiums go up, and some are unfortunately out of the policyholder’s control.
As we deal with the aftermath of the COVID-19 pandemic, skyrocketing inflation and other expensive realities of today’s world, insurance companies are forced to respond.
With record-high inflation rates, the hard truth is insurance companies have higher bills to pay too. “Inflationary pressure is increasing the cost of repairs, car rentals and vehicle replacements,” according to the American Property Casualty Insurance Association.
When prices go up, so must insurance.
Drivers Back on the Road
At the start of the pandemic, people were driving less, there were fewer accidents and insurance companies were giving money back to customers to make up for it. Now mileage is back to pre-pandemic levels and costs have increased.
In fact, accidents are up too. The vehicle crash fatality rate jumped 12% in the first nine months of 2021 compared to the same period in the prior year, according to the National Highway Safety Administration. And those numbers are just starting to level off.
It seems that Americans picked up poor driving habits during the pandemic, as crashes often involved impaired driving, speeding and failure to wear seatbelts.
Cars Have Changed
Modern cars are more than cars. They’re more like computers on wheels.
Take windshields, for example. They aren’t just protective glass anymore, they often include all the technology for advanced driver assistance systems like dynamic cruise control and lane assist, dramatically increasing the cost to repair or replace them.
Because the cost of all significant technology is high compared to what it used to be, repair costs for a newer car could double that of an older model.
It’s an unfortunate set of circumstances that accident rates are increasing at the same time costs of car repairs and medical care are going up.
More Reasons for Auto Insurance Increases
How you drive
Obeying speed limits and traffic laws can dramatically affect your insurance costs. Likewise, the miles driven per car per year can earn a discount or create a greater charge for your auto insurance. Ultimately, the safer a driver you are, the more you can reduce your insurance premiums.
Where You Live
A carrier may find that they need to charge more due to higher claims paid in a state where expenses or litigation is higher. Congested cities may be more prone to crashes or have a higher rate of vehicle theft, which could lead to that more expensive premium.
Drivers who put newly licensed teenagers on their insurance policies will see their auto insurance rates increase, since teenagers are typically involved in more crashes than any other age group. Although, as new drivers build experience without crashes, rates do come back down.
Insurance rates for all drivers reflect costs due to the fraudulent practices of the few. Examples include drivers who moved but didn’t report it, parents who don’t add teenage drivers to their insurance plans to avoid costs, staged accidents and drivers who ask for higher estimates at body shops.
What You Can Do
Review your insurance
This is a good time to get in touch with your insurance agent. Talk to a professional to review what level of coverage you have and go into the conversation with an understanding that costs, in general, have changed.
While some increases are unavoidable, there are some offsets that you can look into. For one, you can consider updating your deductible. If you can handle a higher deductible, it can help to lower your monthly premium.
A review of your insurance policies is recommended annually. Your agent will try to do as much as possible to make sure that you are getting the most from your insurance. There is no cost, and it only takes about 15 minutes.
Improve Your Credit Score
While Massachusetts doesn’t allow it, most states permit credit scoring to help determine auto insurance premiums. Keep on top of your credit score and challenge any errors you find.
Ask About Discounts
While reviewing your policy, ask your agent if you’ve had any discounts recently expire. And while you’re at it, ask if you or your family members qualify for any additional discounts like a good driver, AAA or good student discount. Some providers also offer rate reductions for safety features on your car, paid-in-full discounts, multi-vehicle discounts and bundling home and auto insurance policies together.
Depending on the state where you live, drivers can also receive an auto insurance discount for completing a defensive driving course. The fee to take the class is nominal and the discount usually lasts for several years.
Sign up for a AAA defensive driving course.
Avoid Crashes and Violations
Being a safe driver is one surefire way to keep your rates down.
Drivers who get into a lot of crashes or accrue too many speeding tickets will likely see a surcharge or have their insurance tier adjusted. The tier system is a relatively new way of doing things in the insurance industry, in which those with the least number of occurrences pay the lowest rate.
Insurance providers use tiers to rank customers based on their risk of being involved in another vehicle mishap. While not many people like to be ranked, the industry uses the system to get a more precise evaluation of your driving habits and it sometimes helps prevent rates from skyrocketing for a driver just because of one accident.
What You Shouldn’t Do
Plenty of people that have older cars think about dropping collision and comprehensive, but comprehensive – which protects you from damages not caused by a collision, such as theft, vandalism, storms and animals – is relatively cheap coverage that is smart to keep.
And if you think stopping coverage for a period of time will save you money, it will actually end up costing you more in the long run. “Do not remove your car from your insurance,” stresses Ray Eng, vice president of insurance sales at AAA Northeast. An insurance lapse will result in a penalty as soon as you try to reinsure.
Better Safe Than Sorry
Seeing your auto insurance rates increase is undoubtedly frustrating.
Like groceries and gas, “many view insurance as another consumable,” said Eng. “They may wonder, if I haven’t consumed anything (made any claims) why has my rate gone up?” It’s just the reality of the situation right now that insurance prices need to go up with everything else.
Eng suggests looking at it a different way. “The fact of insurance is not if you have a claim, but what would you like to see happen if you were to have a claim,” he said.
Although you might not love paying a higher price for your insurance, you’ll be thankful to have it if you ever need it.
To learn more about coverage options and savings opportunities, get in touch with a AAA Insurance agent today.