The consumer price index – an indicator of inflation – rose 4.9% in April 2023 from the same month a year earlier, and one of the drivers was auto insurance, according to a just-released report from the U.S. Bureau of Labor Statistics. According to BLS, the latest hike continues a series of increases that have driven up car insurance rates by 15.5% during the past 12 months.
Allstate, for instance, said in May that in the first quarter of 2023, it increased rates by an average of 8.4% in 28 locations. But Allstate wasn’t alone, and consumers have noticed the pinch. More than half (57%) of the policyholders who responded to a CarInsurance.com survey said their carrier had increased their auto insurance rates in the past 12 months, with almost a third – 32% – saying their rates rose 10% or more.
- 43% of drivers said they believe inflation is why their car insurance rates increased during the previous 12 months.
- 57% of drivers said their carrier increased their car insurance rates in the past 12 months.
- 49% of drivers shopped around for another auto insurer in the past 12 months.
Drivers blame inflation for rising car insurance rates
In the spring of 2023, CarInsurance.com surveyed 2,300 drivers nationwide to determine their attitudes about car insurance, inflation, driving habits and more.
Many survey respondents (43%) blamed inflation for the rising rates and half (49%) said they shopped around and bought insurance from another carrier in the past 12 months. Of those who switched, 31% moved to Allstate, 22% to Progressive, 19% to Geico, 17% to State Farm and 12% to USAA.
And chances are more people will start shopping as rates are expected to keep rising, according to the Insurance Information Institute, an insurance industry trade group.
“We expect inflation will continue to have a significant impact on auto insurance rates in 2023,” says Mark Friedlander, the institute’s director of corporate communications.
Friedlander cites the rising cost of new vehicles and repairs as contributing factors, saying there was an 8.3% increase in vehicle parts and equipment costs and a 5.8% increase in the price of new vehicles from January 2022 to January 2023.
However, there are ways drivers can lower their insurance costs.
Inflation and rising car insurance rates
An Insurance Information Institute analysis shows inflation’s impact on the cost of auto insurance throughout the pandemic:
- From 2019 to 2022, cumulative private auto replacement costs escalated by 45.6%.
- From 2020 to 2023, vehicle prices jumped a cumulative 27.1%. Pre-pandemic, the average annual increase in auto prices was 2.6%.
- The average car insurance premium increase last year topped 14%, the highest year-over-year spike. In 2019, the U.S. average premium increase was 1.0%.
“Rising costs of replacement parts and labor will continue to be significant factors in the increasing costs of auto insurance premiums,” Friedlander says.
Kerri M. Camp, professor of marketing at Soules College of Business, says that inflation is the primary cause of the continued increase in auto insurance premiums due to rising labor costs of mechanics and the price of auto parts.
“The shortage of new car availability caused by the computer chip supply chain issues has increased the price of replacement vehicles,” Camp says. “Also, recent years have seen an increase in natural disaster insurance claims due to flood or other damage. All of these factors contribute to the large increase in auto insurance premiums consumers are experiencing in 2023.”
Learn more: How do inflation and interest rates affect insurance costs?
Other factors affecting auto insurance rates
But auto insurance rates aren’t just affected by inflation costs and the frequency and severity of claims.
“After decades of decline, traffic deaths have increased in the past several years due to riskier driving behaviors – more speeding, driving under the influence, not wearing seat belts, distracted driving – since the pandemic began in the first quarter of 2020,” Friedlander says.
In the first quarter of 2022, the National Highway Traffic Safety Administration (NHTSA) estimated that 9,560 people died in motor vehicle crashes, up 7% from the same period in 2021, making it the deadliest first quarter since 2002.
Friedlander says the NHTSA data is vital for understanding the upward pressure on auto insurance rates.
“Attorney involvement tends to be more prevalent in cases involving bodily injury and fatalities. It also has been found to contribute to protracted litigation and higher claims costs,” he says.
Check out the top 10 most important factors that affect car insurance rates
Which states are seeing the most significant rate increases?
Camp says that residents of states like Florida and Rhode Island are seeing higher auto insurance rates due to higher population density and traffic.
“In 2023, the states with the highest auto insurance premiums are Michigan ($4,788), Florida ($2,856), and Rhode Island ($2,748),” Camp says. “The average auto insurance premium in Michigan is 168% higher than the national average due to state-mandated minimum insurance requirements.”
Learn more about U.S. auto insurers’ rates continue to increase
Why are insurance companies raising insurance rates?
Aaron Stevens, senior finance lecturer at Boston University’s Questrom School of Business, says that the cost of a car insurance policy depends on the expected value of losses.
“As the prices for new and used cars, as well as replacement parts and labor, have increased, it makes sense that the expected value of losses paid by insurance claims would increase in tandem,” Stevens says. “Thus, as the costs associated with insurance claims rise, so should the policy premiums.”
This is the most significant increase in several years due to more drivers moving from remote work to on-site office work and increased consumer travel, which resulted in a higher risk of accidents than in recent years, where consumer travel was restricted due to the COVID-19 pandemic, Camp says.
How much are rates increasing?
“In 2022, auto insurance premiums increased by 9%, and rates continue to rise in 2023 an average of 8.4%, resulting in consumers spending about $1,900 per year compared to $1,777 last year,” Camp says. “The average cost of insurance has increased 16.5% overall since 2017, which is a significant increase in auto insurance expenses for U.S. consumers.”
Regarding rising car insurance rates, 57% of drivers said their carrier has increased them in the past 12 months. See the data breakdown in the table below.
| Policy rate increase | Percentage of customers whose rates increased |
|---|---|
| 5% | 23% |
| 10% | 18% |
| 15% | 9% |
| 20% | 5% |
| Other | 2% |
Most consumers surveyed believe their insurance rate increase was due to inflation – 43% of responses, the most-recorded response. See the other answers in the table below.
| Reason for insurance rate increases | Percentage |
|---|---|
| Rates increased for an unspecified reason, but I believe it was due to inflation | 43% |
| Rates increased after adding vehicle(s) to the policy | 17% |
| I don’t know why my rates went up | 13% |
| Rates increased after a car accident | 8% |
| Rates increased after adding another driver(s) to the policy | 7% |
| Rates increased after a traffic/moving violation | 4% |
| Rates increased after an address change | 3% |
| Rates increased after a theft, fire, weather or other non-traffic incident | 2% |
| Other | 2% |
Read more: Why car insurance keeps going up
How many drivers are shopping for insurance policies?
The survey found that 49% of drivers had shopped around for another auto insurer in the past 12 months. Of the people who switched insurance companies, 29% said they saved 15% on their car insurance premiums by switching. See more data in the table below.
| Policy savings | Percentage of customers who saved by switching insurers |
|---|---|
| 5% | 18% |
| 10% | 26% |
| 15% | 29% |
| 20% | 19% |
| Other | 8% |
How many consumers are switching insurance companies?
Friedlander says that auto insurance is more competitive than any other insurance market, which benefits consumers.
“The rising cost of car insurance is generating a spike in drivers shopping their coverage. According to a just-released J.D. Power/TransUnion report, the quote rate in the first quarter of 2023 was 12.4% and the switch rate was 3.9%,” he says.
CarInsurance.com’s driver survey found that 49% of consumers who shopped for a new policy are switching to and from large insurers like Allstate, Geico, Progressive and State Farm.
The tables below show the top companies customers are switching to and from.
| Company | Percent of respondents who switched to the company |
|---|---|
| Allstate | 31% |
| Progressive | 22% |
| Geico | 19% |
| State Farm | 17% |
| USAA | 12% |
| Company | Percent of respondents who left the company |
|---|---|
| Allstate | 24% |
| Geico | 22% |
| Progressive | 21% |
| State Farm | 20% |
| Farmers | 14% |
Check out our detailed guide on how to switch car insurance companies
How can you save on car insurance?
While you can’t control inflation, you can shave some dollars off your insurance premium.
“When looking at inflationary issues, you’re going to get hit from every direction – from buying a car, gas and the insurance for the car,” says Loretta L. Worters, vice president of the Insurance Information Institute. “It’s a good idea when shopping for a vehicle to check with your insurer to see the cost before you buy it.”
Here are other ways to save on car insurance:
- Think twice between leasing or financing a vehicle. You might also think twice before leasing a new car or taking out a loan on your new car: “You’ll need to pay for collision insurance as well as liability, which can significantly increase your premiums,” she says.
- Consider buying a cheaper car.
- Take a defensive driving course. You can also save by taking a defensive driving course, which can shave anywhere from 5% to 20% off your car insurance.
- Pay upfront or sign up for autopay. Other discounts include paying your premium upfront or signing up for autopay. Some insurers will bump down your premium by 3% to 5%.
- Bundle your insurance. You can also save by bundling your insurance, such as with homeowners or renters insurance.
- Don’t forget to do this one thing. Be sure to compare rates by getting quotes from several insurers. This will make sure you land the most affordable insurance.
Guide: How to get discounts on car insurance
Final thoughts: Car insurance and inflation
Natural disasters and inflation seem poised to keep auto insurance increasing throughout 2023. Shopping around for a new policy is the best way to ensure you have the lowest rate when renewing.
– Jackie Lam contributed to this story
Resources & Methodology
Sources
- Insurance Business Magazine. “Revealed – how much more will Americans be paying for car insurance in 2023?” Accessed February 2024.
- U.S. Bureau of Labor Statistics. “Consumer Price Index up 0.4 percent over the month, 6.0 percent over the year, in February 2023.” Accessed February 2024.
- USA Today. “Car prices may fall this year, but auto insurance will cost more. Here’s why.” Accessed February 2024.
- Allstate Investors. “Allstate Reports First Quarter 2023 Results.” Accessed February 2024.
- U.S. Bureau of Labor Statistics. “Consumer Price Index.” Accessed February 2024.
Methodology
CarInsurance.com commissioned survey company Slice to survey drivers nationwide in 2023 about their driving habits, favorite driving songs, the best roads and DMVs, inflation and attitudes about car insurance. The survey was conducted March 24-April 4, 2023. There were 2,300 respondents.
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Laura Longero
Executive Editor
Laura is an award-winning editor with experience in content and communications covering auto insurance and personal finance. She has written for several media outlets, including the USA Today Network. She most recently worked in the public sector for the Nevada Department of Transportation.
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Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like ExpertInsuranceReviews.com and InsuranceHotline.com and managing content, now at CarInsurance.com.
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Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.