Inflation drives up prices in all industries, including car insurance.
Like many Americans, you may have noticed an increase in premium on a recent billing statement from your insurance company. Maybe you’ve been asking yourself, “Why does my car insurance keep going up?”
Your car insurance premium can go up for a variety of reasons, such as when a discount expires, your car usage increases, or if you get a speeding ticket.
Economics can also be a factor in your auto insurance rate. Keep reading to learn more about the relationship between car insurance premiums and the economy.
Visit Faithful to learn about auto insurance and get quotes from leading carriers.
- What you need to know about insurance and inflation
- Why are car insurance rates going up?
- How to lower auto insurance rates
When the pandemic hit in 2020, lockdowns kept many drivers off the roads, resulting in a profitable year for insurers. According to a report by the Wall Street Journal, many insurance companies have even given discounts to their policyholders or reduced rates.
The economic story of 2022 was that massive inflation drove up costs in almost every industry. In fact, between June 2021 and June 2022, the CPI rose 9.1%, a 40-year high. This means that you spend 9.1% more on goods and services than you did a year ago.
So you pay more to fill up your gas tank, put food on the table and, yes, insure your cars. According to The Wall Street Journal, many auto insurers are raising premiums by 6-8%, and in some cases even higher.
In the face of higher prices, it may be tempting to save money by reducing car insurance coverage, but this may not be a smart move. While you can save on your monthly insurance premium with lower coverage amounts, you may end up with higher out-of-pocket expenses after an accident.
A number of factors affect premium increases, many of which are beyond your control. For example, according to the Insurance Information Institute, the number of car accidents and their cost is a factor in car insurance pricing in every state.
Other factors causing the auto insurance market to increase insurance rates for drivers include:
- Car prices – Both used and new cars experienced skyrocketing inflation in 2021. Although price increases have begun to cool, new car prices still rose by 10.4% between July 2021 and July 2022. Similarly, used cars and trucks also rose by 6.6% over the same period. period. Remember that expensive car repairs are more expensive and therefore require higher sums insured and insurance premiums.
- Repair cost – Supply chain disruptions, higher auto parts prices, and a shortage of workers lead to higher repair costs for your car and, in turn, higher insurance rates. Auto repair costs were 8.1% higher in July 2022 than in July 2021, according to the U.S. Bureau of Labor Statistics.
- Chip shortage Semiconductor chips are a critical component in today’s vehicles that control everything from your navigation system to tire pressure sensors. Unfortunately, the shortage of chips is pushing up car prices, which means it’s getting more expensive to insure your car, just like repairing it after an accident.
- Labor and administrative expenses — Labor shortages also led to higher repair and insurance costs. According to a report by the TechForce Foundation, in 2021, the demand for transportation professionals exceeded supply by a ratio of 5:1. With fewer people doing car repairs, companies must bring in skilled technicians with higher pay, fueling insurance inflation.
- Driving after the pandemic Drivers have taken off to an unprecedented level in 2020, with many drivers no longer having to commute to work, school, or go about their daily business. But as driving levels return to pre-pandemic levels, insurance payouts are rising along with insurance premiums.
Reliable makes it easy compare auto insurance rates from several operators, all in one place.
You may not be able to control premiums in the auto insurance market, but you can take steps to lower auto insurance ratessuch as:
- Shop for the best deal. Get quotes from multiple car insurers to make sure you’re getting the best deal. While price is an important factor to consider, it is equally important to review each insurer’s financial stability outlook with rating companies such as AM Best and Standard & Poor’s.
- Combine car and homeowner policies. Purchasing more than one policy from the same insurance company – or bundling – may entitle you to a discount on multiple policies. For example, you can save money buying car insurance from the same insurer that carries your homeowners insurance.
- Ask for discounts. Use any discounts you may be eligible for, for example, discounts for low mileage, discounts for good students and retirees. Contact your agent to find out what discounts are available to you.
- Follow the rules of safe driving. You can qualify for a safe driving discount by completing a safe driving course. In addition, adhering to safe driving practices can reduce the likelihood of a traffic accident and help avoid traffic violations in your driving history.
- Expand your franchise. Increasing your deductible—the amount you pay in a claim before your coverage kicks in—may lower your premium now. Remember, however, that you will pay more up front if you file a claim in the future.
Keep in mind, car insurance premiums usually change from year to year. Taking the steps above can help you fight rate hikes and make your insurance premiums more manageable until inflation comes down.
If you’re ready to get auto insurance quotes, Credible makes it quick and easy for you to compare insurance rates from leading carriers.
Credit: www.foxbusiness.com /