Rising Car Insurance Costs: A Trend Among Drivers
In a recent survey, more than half of drivers (57%) claimed their car insurance rate increased in the last 12 months. In fact, 32% of these drivers reported an increase of at least 10%, prompting many to explore different insurance carriers. Approximately a quarter of respondents left Allstate, followed by 22% who parted ways with Geico and 21% who switched from Progressive.
Reasons Behind Rising Auto Insurance Rates
Forty-three percent of drivers attributed the increase in auto insurance rates to inflation. According to the Consumer Price Index, auto insurance rates have risen 14.7% from January 2022 to January 2023, with predictions for continued increases. Currently, full coverage car insurance averages around $2,014 per year or $168 monthly. Companies like Progressive have indicated plans to re-evaluate and possibly raise rates further throughout the year.
The Impact of Inflation on Insurance Premiums
Aaron Stevens, a senior finance lecturer at Boston University’s Questrom School of Business, noted that “the cost of a car insurance policy depends on the expected value of losses.” He explained that as the prices of new and used vehicles, as well as replacement parts and labor, increase, the expected value of losses tied to insurance claims inevitably rises. Therefore, as the costs associated with claims grow, insurance premiums must adjust accordingly.
Shopping for Better Rates
As rates continue to climb, more individuals are motivated to compare prices and secure the best deals available. Below is a summary of how many individuals saved by switching insurers:
| Policy Savings | Percentage of Customers Who Saved by Switching Insurers |
|---|---|
| 5% | 18% |
| 10% | 26% |
| 15% | 29% |
| 20% | 19% |
| Other | 8% |
Changing Consumer Behavior in Insurance Shopping
Stephen Crewdson, senior director of insurance business intelligence at J.D. Power, remarked that “auto insurance customers are starting to shop for insurance like they shop for gas.” This shift reflects a more proactive approach to seeking out insurance plans that align with individual needs and budgets. Consequently, this trend may significantly impact carriers, particularly those that have invested in building long-term relationships through initiatives like bundling.
