Why are Car Insurance Rates Going Up

In this article, we’ll discuss factors affecting the market. Also, there are ways to help lower your auto insurance rate.

There are many reasons for the current auto insurance rate increases across the market. Here are some of the notable ones:

Starting in early 2020, people began staying home because of the pandemic. They were generally driving less, which resulted in fewer accidents. During 2021, people started returning to pre-pandemic behaviors such as driving more often. More cars on the road generally means the likelihood of more accidents. There has also been an increase in the severity of car accidents. ¹

Another contributor affecting the auto insurance market: The value of most vehicles — both new and used — is going up. In fact,  used car prices are up 26.4%; new car prices are up 9.8%. ²

What’s causing this? Like many of the other price increases happening in the United States and around the world today, there has been a rise in the demand for cars, SUVs and trucks. Also there is a demand for their parts at a time when supply is going down.

People still want new vehicles for the reasons they always have:

Still wondering why car insurance rates are going up? On top of car prices, many of the people who moved out of cities and into the suburbs and rural areas during the pandemic now need cars for transportation. This has created a novel form of demand in addition to the typical reasons individuals buy new cars.

Vehicle supply is down in large part because key materials like semiconductors, which are needed for the computers found in cars today, experienced a manufacturing interruption during the pandemic. Although manufacturing has resumed, the current supply still runs short of existing and pent-up demand. Also, like many other products imported into the United States, countless new cars, and components to build them are sitting on ships and docks, waiting to be trucked to dealerships and factories across the United States. ³  

More expensive cars and parts also make repairs and replacements costlier. As of October 2021, average car insurance claim costs were up 20% and the cost of parts were up 6%. ⁴  This is another factor affecting the auto insurance market. Still wonder why are car insurance rates going up?

There are other factors not related to national and global events that could increase your auto insurance rates:

While some insurance price increases are out of your control, there are things you can do to help get them in check.

Sources
¹ https://www.nhtsa.gov/press-releases/traffic-fatalities-estimates-jan-sept-2021
² https://www.bls.gov/news.release/archives/cpi_10132021.htm
³ https://www.nytimes.com/2021/04/23/business/auto-semiconductors-general-motors-mercedes.html
⁴ https://227gsr5ihx54be8by2hxnudd-wpengine.netdna-ssl.com/wp-content/uploads/2021/10/10-Oct-Trends.pdf

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