If you’re feeling like your wallet is being taken for a ride with skyrocketing auto insurance rates, you’re not alone on the back roads; you’re in six lanes of bumper-to-bumper traffic.
That’s according to a research report by Insurify and the U.S. Bureau of Labor Statistics’ most recent consumer price index report, which showed that rates are up over 19% year over year nationwide, leading many drivers to cut coverages and shop around more for the most competitive rates in an increasingly expensive insurance market.
“I would not have even looked at my coverages with Farmers [Insurance] if I hadn’t noticed my premiums jumped up in September 2023, and when I looked at my payment history, I saw that I had been paying more since May 2023,” says Dave Carlone, a 34-year-old geologist and Tennessee resident who recently decided to trim his policy down to save money.
As inflation, increasing accident and repair costs, and global warming drive the biggest auto insurance rate hike since the 1970s, household budgets nationwide are feeling the pinch, emphasizing the importance for thrifty drivers to shop around for the most cost-effective coverage to mitigate the growing financial burden.
One of the simplest explanations for the recent increase in auto insurance premiums is the rise in the number of accidents and claims filed by drivers and, with it, inflation-driven costs. This has led to higher losses for insurance companies, which are struggling to make a profit as rates are failing to align with insurer losses.
For example, State Farm, the largest property and casualty insurer in the United States, reported its largest on-record net underwriting loss of $2.87 billion in the first quarter of 2023.
“Insurance companies are impacted by inflation, too,” says Cassie Sheets, a car and home insurance expert and writer with Insurify. “As the cost of auto body parts and repairs goes up, claims get more expensive. Insurers have raised rates to cover their losses.”
Other factors are at work as well.
“There has been an increase in the frequency and severity of accidents, riskier driving behaviors like distracted driving, and injuries and fatalities on the road, which are, in turn, increasing the number of litigated claims for insurers,” says Mark Friedlander, director of communications for the Insurance Information Institute. “Combined with the increasing costs of replacement parts, rising labor expenses, and escalating medical costs for treating accident victims, are leading to higher costs for insurers, who are increasing rates to cover those costs.”
Additionally, 2023 has seen nine major weather- and climate-related events causing over $1 billion in damage, according to the National Centers for Environmental Information. As climate disasters increase in certain states, we can expect rates to continue going up in those areas.
In a few instances this year, some insurance companies appear to have even started cutting their losses instead of raising premiums, further limiting drivers’ coverage options in those states. In California early this year, State Farm, Allstate, and Geico collectively declared a cessation of new policy sales. Likewise, later in July, Farmers Insurance announced that they would discontinue adding coverage to auto insurers in Florida.
While it is unlikely drivers will be in for any relief anytime soon, there are still a few strategies that savvy consumers with good driving records can use to help mitigate expenses.
Drivers with older vehicles, for example, should consider dropping unnecessary coverage from their auto insurance policy. This includes collision coverage, addressing damage from accidents not the fault of the driver, and comprehensive coverage, covering theft and non-accident-related damage, such as hail damage to a windshield. The payout for both is capped at the car’s value so drivers with older or paid-off vehicles may find that the cost of these coverages may outweigh their benefits.
With so many consumers flocking to used vehicles in recent years, this might be the most prudent advice to give the majority of car owners. Of course, the downside to these savings is having to pay more, or even all of the cost out of pocket, in the event of vehicle damage not being covered. This makes it all the more important that drivers look to their own driving history to ascertain which of their coverages have been useful in past years and which deserve to be pruned or removed entirely.
But, this isn’t drivers’ only recourse for savings. Fans of full-coverage insurance and new vehicle owners still have a few tactics they can employ to lower their auto insurance bills.
“That’s not the only way to reduce your premium,” says Sheets, who wants drivers to know there are other options available besides simply gutting your policy. “If you want to keep full-coverage insurance, comparing quotes from multiple insurance companies could help you find a better rate. You could also increase your deductible, but that means you’ll pay more out of pocket if you’re in an accident.”
Carlone himself had employed a few of these strategies, having switched three times in the last nine years to different providers and last month cutting down on some of his coverages. His most recent policy changes brought his $1272 six-month premium with Farmer’s Insurance down to $1092 by looking at which of his collision and liability coverages had gone unused and scaling back on them, saving him 14% on his premium.
“I went through my coverages and chose a couple of items that were above and beyond normal collision and liability that I felt I didn’t need anymore,” says Carlone, who decided that he rarely used his collision protection enough to make it worth the cost and decided to reduce some of his coverage last month. “Repair of windshields is the only thing I have ever needed it for, and the cost was high enough that in order to make up the cost, I figured I would need to get new windshields twice a year.”
Another suggestion to help bring premiums down that isn’t just for teenagers and often carries over with many providers is to take a defensive driving course, an act that can save you 10% off some providers’ premiums.
All said, navigating today’s inflated insurance premiums requires a proactive, hands-on approach, and the strategies employed by thrifty drivers like Carlone can serve as valuable lessons. By regularly reassessing coverage needs, shopping around for the best rates, and taking advantage of savings opportunities like defensive driving courses paired with a clean driving record, drivers can effectively manage their costs and keep their wheels on the road.