Have you noticed the cost of your car insurance continuing to climb? If so, you’re in good company. In the U.S., car insurance rates increased by double digits in 2023, according to S&P Global Market Intelligence, a financial and analytics corporation that tracks such matters.
“For 2023, 43 states and the District of Columbia reflected an effective rate change greater than 10%, pushing the calculated nationwide effective change of 14% during the year. Only 26 states had a double-digit effective rate increase in 2022, translating to a calculated national average increase of 11.4%,” according to an S&P report released in January.
This increase in rates can be chalked up to a host of economic factors and the market climate at large. That being said, you can still save on your insurance despite feeling the financial squeeze.
How does inflation affect insurance costs?
During the past 12 months, inflation for all items tracked by the U.S. Bureau of Labor Statistics has increased 3.1% before seasonal adjustment. And the index for motor vehicle insurance increased 20.6%.
Inflation increases the cost of supplies and labor, which means insurers must pay out pricier claims.
“With inflation hitting an astounding (high), general cost increases have affected several components of car insurance from repairs to replacement costs, where insurance companies are paying out more to buy comparable cars when their customers’ cars are totaled,” says Loretta L. Worters, vice president of the Insurance Information Institute, or III, an insurance industry association.
Why are insurance costs increasing in 2024?
Car insurance rates are climbing due, in part, to increased repair costs driven by sophisticated technology improvements in newer vehicles. Additionally, the rising frequency and severity of auto-related accidents contribute significantly to the uptrend in insurance premiums.
In order to combat these rising costs, it is important for drivers to regularly review their car insurance policies and shop around for the best rates. It is also essential to practice safe driving habits, such as obeying speed limits, avoiding distractions while behind the wheel, and maintaining a safe following distance.
“Some motorists may see an increase in auto insurance rates due to a rise in accident frequency, accident severity and replacement parts inflation,” Worters says.
In addition to these external factors, it is also crucial for drivers to maintain a clean driving record in order to keep their insurance rates low. This means avoiding accidents and traffic violations, as they can result in increased premiums or even policy cancellation.
Frequency and severity of auto accidents
The COVID-19 pandemic brought about major changes in our daily lives, including how people commute. With lockdowns and restrictions in place, there were significantly fewer cars on the road. However, this did not translate to safer roads as one might expect.
Despite fewer cars on the road, traffic fatalities rose during the pandemic due to riskier behavior, including increased speeding and reduced compliance with safety laws. The reduced traffic may have given a false sense of security leading to more severe accidents.
“After spiking during the pandemic, traffic deaths have been on a slow but consistent decline for the past year,” U.S. Transportation Secretary Pete Buttigieg says in a news release. “This is an encouraging sign as we work to reverse the rise in roadway deaths, but there is much more work ahead to reinforce this downward trend and make it permanent.”
See the trends over time for Americans killed and injured in crashes in the table below.
| Year | People killed and injured in auto crashes |
| 2018 | 36,835 |
| 2019 | 36,355 |
| 2020 | 39,007 |
| 2021 | 42,939 |
Disaster-related claims
Natural disasters, from floods to wildfires, can wreak havoc on vehicles, often resulting in comprehensive insurance claims that drive up overall policy costs. Insurers adjust premiums accordingly, reflecting the increased risk and frequency of such catastrophic events.
“The challenge has also been difficult with premiums lagging behind the rate of inflation, while claims costs have increased,” Worters says.
Increased auto repair costs
The III estimates that auto replacement costs climbed 12.5% from January 2021 to January 2022.
“The introduction of new automotive technology improved safety — think crash avoidance sensors — and increased fuel efficiency, such as replacing steel with aluminum, have increased the cost of either repairing or replacing damaged vehicles,” Worters says.
Furthermore, catalytic converter thefts were 21% higher in 2023 than four years earlier, according to Edmunds.
A catalytic converter is a component of a vehicle’s exhaust system that reduces toxic gases and pollutants into less harmful emissions. Catalytic converters contain precious metals like platinum, palladium, and rhodium, which have high value. Recently, thefts have skyrocketed due to the metals’ worth, making converters a lucrative target for thieves.
Catalytic converters have been required in all new vehicles since the mid-1970s, making them an essential part of modern automobiles. They work by converting harmful carbon monoxide, nitrogen oxides and other pollutants into less harmful emissions such as water vapor, carbon dioxide and nitrogen gas.
What to do when car insurance rates go up
How to save on car insurance despite increasing costs
While you can’t control inflation or interest rates, you can shave off some dollars on 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,” Worters says. “It’s a good idea when shopping for a vehicle to check with your insurer to see what the cost will be 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.
- Take a defensive driving course. Take a defensive driving course, which can shave anywhere from 5% to 20% off your car insurance, but this discount isn’t available in all states.
- 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%.
- Drop coverage you don’t need. If you have a low-value vehicle that’s paid off, you can save money by dropping comprehensive and collision coverage.
- Bundle your insurance. You can also save by bundling your insurance, such as with homeowners, condo or renters insurance.
- Compare rates. Get quotes from several insurers to compare rates. This will ensure that you get the most affordable insurance.
- Maintain a clean driving record. You’ll save money if you don’t have to pay surcharges for accidents and tickets.
- Increase your deductible. This is a great option if you have plenty of savings to cover the deductible if you must make a claim.
- Sign up to have your driving monitored. Telematics is a great way to save money on your policy.
Read more about drivers switching car insurance carriers as inflation continues
You might also be interested inResources & Methodology
Sources
Bureau of Labor Statistics. “Consumer Price Index.” Accessed February 2024.
Bureau of Labor Statistics. “Consumer prices up 9.1% over the year ended June 2022, the largest increase in 40 years.” Accessed February 2024.
Edmunds. “Catalytic Converter Theft: What You Need to Know.” Accessed February 2024.
NHTSA. “NHTSA Estimates Traffic Fatalities Dropped in the First Three Months of 2023.” Accessed February 2024.
NHTSA. “Traffic Safety Facts Annual Report Tables.” Accessed February 2024.
S&P Global. “Largest US private auto insurers boost rates by double digits in 2023.” Accessed February 2024.
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