Car owners in the U.S. are begging for a ‘brake’ after auto insurance prices soared to a 47-year high in December — and they still show no signs of decelerating.
The cost of auto insurance jumped by 20.3% in December from a year earlier, according to Bureau of Labor Statistics inflation data — marking the 16th straight month of annual price gains over 10%.
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In fact, prices have surged to such an extent that auto insurance accounted for 15% of the overall increase in CPI over the final quarter of 2023 — a feat that Jefferies economist Tom Simons told Reuters was “truly … remarkable.”
What’s driving car insurance price hikes?
There are several factors driving up the cost of car insurance. To start with, traffic levels have returned to their pre-pandemic norms, resulting in more accident claims, litigation and medical costs for insurers to pay out (and price for).
Inflation has also driven up the cost of new, used and rental cars — as well as replacement car parts. This has resulted in higher repair costs, again due to inflation, supply chain disruption and also new technologies in vehicles — like parking sensors, lane-departure warnings and batteries in electric vehicles — which are expensive to replace.
This is particularly true with regard to electric vehicles, which typically cost more to insure than traditional gas-powered vehicles due to the vehicles’ complex technology (and the expertise needed to fix them).
Finally, even the weather is having an impact on auto insurance premiums. In 2023, the U.S. suffered a record 28 weather and climate disasters — including tropical storms, wildfires and floods — that cost $1 billion or more in damage. Insurers can’t control the weather, but they can manage their exposure to it by being more selective over what coverage they’ll write in disaster-prone states like Florida and California and how much they charge.
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How to ‘brake’ the pattern
After the December CPI data landed, White House National Economic Council Director, Lael Brainard, was grilled about what the Biden administration is doing to tackle the nation’s soaring car insurance costs.
Brainard said the government will continue to call on “Big Business to bring down those prices that they increased so much when supply chains were snarled.” She also noted that “independent agencies” are working hard to tackle “unfair and deceptive price practices that are leading to greater costs for American consumers.”
If that sounds like hot air to you, why not take the driver’s seat?
When it comes to car insurance, it can pay to shop around. If your policy is about to renew and the cost has jumped significantly, you should consider getting at least three quotes from other insurance companies just in case you can get a lower rate.
While shopping for quotes, consider the many discounts drivers can access to lower the cost of car insurance — and remember, it helps to have a clean driving record, with no at-fault accidents or moving violations.
Furthermore, long-time, loyal customers are often rewarded with special pricing, as are those who insure more than one driver or car, as well as drivers who combine (or bundle) their home and auto insurance policies with the same insurance company.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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