Insurance customers have undoubtedly noticed increased insurance rates and price hikes for used and new vehicles. Drivers who experience rate hikes without significant changes to their driving record are confused and frustrated. The labor market and part availability are the reasons why.
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Why are Insurance Rates Going Up?
Replacing and repairing vehicles is more expensive than a few years ago. Recent supply chain disruptions have driven demand for new cars and parts. As demand increases, prices for those items increase as well. Americans also see a labor shortage. The high demand for mechanics and technicians means an increased hiring cost.
The US Bureau of Labor Statistics shows a 10.4% increase in new vehicle prices, a 6.6% increase in used vehicle prices, and an 8.1% increase in vehicle maintenance and repair. Insurance companies have to pay increased rates to fix their customers’ vehicles. They then pass the rate increases on to their customers.
What Can Cause Car Insurance Rates to Increase?
In general, the driver’s habits on the road and prices surrounding vehicle upkeep and repair will cause policyholders’ rates to increase or decrease. Any significant changes during the insurance term can cause insurance rates to increase at renewal. The renewal price will reflect any new auto accidents, tickets, change of address, general insurance, or credit score changes.
Speeding tickets and other moving violations
Speeding tickets and moving violations, like DWIs or DUIs, show that a driver is more likely to cause bodily harm or property damage while driving. Any damage caused by the driver will result in a claim, which has to be fixed by the insurance company. Insurance companies will try to reduce the amount they would have to pay out of pocket, resulting in higher premiums for riskier drivers.
Accidents: Both at-fault and Not-At- Fault
Any accident on a driver’s record indicates their safety habits while driving. More times than not, at-fault accidents will cause a policy’s premium to increase at renewal. Depending on your state, not-at-fault accidents can also cause a driver’s rates to increase.
The rate increases for not-at-fault accidents are often less than those for not-at-fault accidents. Some states even allow companies to increase a driver’s rates for weather claims or theft and other incidents where the insured had no control over the situation.
Moving
Changing the registered address of a vehicle when not in use could cause an increase in policy premiums. Moving from a safer area to a more dangerous one could cause the company to see the driver’s location as more of a risk for theft or hit-and-run accidents. A policyholder with flashy cars on their policy could drive the price hike from moving even higher.
Changes to your insurance score
All states except California, Michigan, Hawaii, Washington, and Massachusetts use a driver’s credit score to indicate how likely they are to file a claim. Any significant changes to a person’s credit score can translate into more claims for the insurance company. The company will, in turn, raise a policy’s premiums to offset the risk.
Adding Vehicles or Drivers
When a policyholder adds new vehicles or drivers, the insurance company will evaluate them and add the appropriate premium to insure them under the same policy. A new driver’s car and driving record will significantly impact how much the rate increases to cover them under the same policy.
Any tickets or accidents on a driver’s record will increase the premium amount more than they would for a driver with a clear record. Also, a fancier, faster, more dangerous car will require a higher premium increase.
Why did my auto insurance go up in 2022?
Customers can blame rising repair costs, supply chain disruptions, inflation, and labor shortages for the premium increases of 2022. As business costs go up across the board, policyholders can expect to pay more for the same policy coverages.
Supply Chain and Other Disruptions
COVID-19 shutdowns led to decreased supply of available auto parts, leading to higher prices for repairs and corresponding insurance premiums. However, other situations unrelated to COVID-19 have hampered efforts to increase the availability of needed auto parrts.
For instance, the ice storm in February 2021 knocked out power across the southern US and halted production in some areas. Another example would be the Suez Canal blockage in March 2021. Just as maritime shipping returned to its pre-pandemic pace, the situation set production behind what it would need to keep up with the rising demand.
Labor Shortage
The Bureau of Labor Statistics reports that unemployment is almost returning to its pre-pandemic rate. However, the layoffs of 2020 and the current Great Resignation have caused many people to reconsider their career choices, leap to other fields, or leave the labor force altogether. Fewer people working in a specific area means higher prices for their services.
Rising Repair Costs
Parts, maintenance, and labor will be more expensive in 2022 than in the past. More costly parts and work lead to insurance companies paying more and possibly waiting longer for vehicle repairs in 2022 than in 2021 or 2020. Insurance companies, in turn, spread the costs among their customers, which means rate increases for everyone involved.
Inflation Hits the cost of buying and repairing a car
The US Labor Bureau of Statistics notes that the Consumer Price Index increased 8.3% between August 2021 and August 2022. This increase means Americans are paying 8.3% more for the same items than we paid last year. This overall increase includes a 7.4% increase in insurance rates between July 2021 and July 2022.
What causes insurance rates to go down?
An insurance premium could decrease if an accident or ticket is used to rate the driver ages out of the applicable timeframe. Once the incident ages out of the relevant timeframe, the insurance company doesn’t count it against the driver anymore, making his rate drop.
As drivers get closer to their 40s, their rates will continue to decline. Any insurance company that uses mileage to rate drivers could give a discount if the insured person drives fewer miles per year. The rate could also drop as the policyholder and drivers qualify for more deals than before.
How to Maximize your opportunities to save on car insurance
Drivers can double-check their policy to ensure they have all the possible discounts to bring down their rates. Drivers can also consider raising their deductibles or lowering their coverages to reduce their premiums. They should also consider bundling their more significant policies if they haven’t already. If all else fails, they can shop for other insurance companies to find the lowest rates in their area.