Car Insurance Rates Are Going to Increase, Again! Insanely High Car Insurance Rates – But Why?

By Lauren Fix

Big insurers say they need to boost premiums further to offset higher costs for repairs

Experts are predicting car insurance rates will rise at least 8.4 percent this year back in January and, at least for the nation’s two largest auto insurers, rates rose that much or more in the first quarter and more rate hikes are on the horizon. Buckle up, everything is about to get more expensive, its important to know what and why.

Inflation is here and as everything is increasing in price from fuel to food to housing, the rate of customer car insurance claims are not. Insurance companies got away with fewer car insurance claims and record profits during the COVID-19 lockdowns when traffic was light, people were staying home and minor fender benders were at an all time low. The most common insurance claim is a fender bender. Now that driving habits have returned and people are back to road trips and moving on with life, insurance claims are back to normal levels. Prices on car parts for repairs are still high and parts have been backlogged, leaving to more customers relying on insurance provided rentals.

Then there’s been the sharp rise in catastrophic claims, both in autos and homeowners insurance. Think about all the snow storms, hurricane and tornados. Thanks to unprecedented flooding and strong storms in cities across the U.S., Allstate saw catastrophe costs surge by over a billion dollars in the first quarter compared to last year. An Allstate executive said rates would go up “until we get back to historical profit margins”. Hmm, there is more to discuss there for sure. So you are footing the bill.

It’s just the insurance companies that are falling on hard times and taking loses.

Progressive shares slipped 2.5%, following the release of a quarterly shareholder letter, they have reduced advertising for the well known marketing character featuring “Flo,” the fictional salesperson. Progressive, said the move, being accompanied by premium-rate increases, is not intended to bring growth “to a screeching halt.” Any impact would depend on how rivals also adjust their prices in the face of inflation. In other words, if competitors raise their rates, so are we, which means everyone pay more for insurance.

Progressive intends “to be aggressive with raising rates,” and the increases would be on top of premium hikes of more than 13% in 2022 and an additional 4% in the first quarter, per their company executive.

Travelers Companies said last month that it raised car-insurance rates by 14% on renewed policies in the first quarter. An executive said the company expects the figure “to be modestly higher than this level throughout the remainder of 2023.” Which means higher rates across the board.

Insurance companies claim that they need rate increases “of around 10 more points (that’s 10%) this year to catch up and stay ahead of the trend” of the higher costs in claims for private-passenger vehicles. So far drivers have seen increases that range from 8% to 12%. Newer cars are costing more to insure and this makes it more difficult for the average person to afford a new car plus the increased insurance rates.

The average price of a new car is just shy of $50,000 and $66,000 for electric vehicles, which have higher insurance rates. The average new car payment hit an astonishing $777 earlier this year, and used car prices continue their upwards climb as well.

If you can even afford a new or used car in the first place, plus higher interest rates, higher fuel costs and electric fees for plug-in cars, this is will impact the economy, cars sales and literally everyone.

Make sure to shop around online before you renew your insurance policy. You can save a few dollars by increasing your deductible, take safe driver or points reduction classes, and bundle your home and car insurance.

Lauren Fix, The Car Coach®, is a nationally recognized automotive expert, analyst, author, and television host.  A trusted car expert, Lauren provides an insider’s perspective on a wide range of automotive topics and aspects, energy, industry, consumer news, and safety issues.   

Lauren is the CEO of Automotive Aspects and the Editor-in-Chief of Car Coach Reports, a global automotive news outlet. She is an automotive contributor to national and local television news shows, including Fox News, Fox Business, CNN International, The Weather Channel, Inside Edition, Local Now News, Community Digital News, and more. Lauren also co-hosts a regular show on ABC.com with Paul Brian called “His Turn – Her Turn” and hosts regular radio segments on USA Radio – DayBreak. 

Lauren is honored to be inducted into the Women’s Transportation Hall of Fame and a Board Member of the Buffalo Motorcar Museum and Juror / President for the North American Car, Utility & Truck of the Year Awards.  

Check her out on Twitter and Instagram @LaurenFix.

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