Car Insurance Premiums Hit Record Highs

A file photo illustrates the aftermath of a car accident in Irvine, Calif., on March 30, 2022. John Fredricks/The Epoch Times

As Americans contend with higher costs for food and housing, they are being hit with another large and often unexpected price hike: car insurance premiums.

According to the motor vehicle insurance index compiled by the U.S. Bureau of Labor Statistics (BLS), average car insurance rates have increased more than 50 percent between August 2020 and August of this year. By comparison, the cumulative U.S. inflation rate since 2020 is approximately 21 percent. 

An August report by Insurify, an insurance agency, predicts more of the same in the coming months, with an annual rate increase of 22 percent projected for 2024 as insurance underwriters work to claw back losses they incurred over the past several years. 

In 2022, car insurers reported record underwriting losses of $33.1 billion and responded by increasing premiums by an average of 24 percent in 2023. Insurers blamed a number of factors including general inflation, the increased cost of vehicle repairs, higher prices for new cars, repair delays due to supply chain disruptions, as well as an increase in car accidents. Underwriting losses, which are the excess of claims paid over premiums received, decreased significantly in 2023 to $17 billion, the report stated.

Many of the factors that are driving up rates are beyond the control of car owners, but driving habits are not.

“Right now, we’re seeing some of the highest car insurance premiums that we’ve ever seen, so it’s important for people to control what they can,” Shannon Martin, an insurance analyst at Bankrate and a licensed insurance agent, told The Epoch Times.

“For the most part, you can control your driving record by being attentive on the road. Don’t look at your phone, reduce speeding, and don’t partake in drinking and driving.”

While the rate hikes affect everyone, even people with excellent driving records, the additional cost of bad driving habits is substantial. 

Bankrate, which tracks premium data monthly, found that the average premium increase for drivers of one at-fault car accident as of September is 44 percent; the rate increase for a speeding ticket is 22 percent; and the rate increase for driving-under-the-influence (DUI) is 92 percent, Martin said.

In calculating rates, insurance companies consider not only the payments they already had to make but also the likelihood they will have to pay more in the future. Insurance data indicated a sharp increase in Americans’ bad driving habits in the years following the COVID-19 pandemic. 

An Increase in Bad Driving

According to the National Safety Council, speeding-related deaths increased by 19 percent in 2020 and another 9 percent in 2021, resulting in the most deaths recorded since 2007. Speed-related deaths fell by 2.8 percent in 2022, with excessive speed being a factor in 29 percent of the 12,151 traffic fatalities that year, killing 33 people on an average day.

Although fewer people commuted to work during the 2020 COVID-19 pandemic, car accidents soon increased beyond pre-pandemic levels as Americans took to the road again. Insurers saw an increase in speeding, distracted driving, and even driving without seat belts. 

“It’s almost like people forgot the rules for a little bit, and it increased the amount of accidents,” Martin said. “We are seeing that rate start to come down, but it’s not going back to pre-pandemic levels.”

Regarding intoxicated driving, the National Highway Traffic Safety Administration reported that approximately 32 percent of crash fatalities in America involve drunk drivers. In 2022, 13,524 people were killed by drunk drivers, averaging one death every 39 minutes.

According to a Bankrate report, alcohol-related traffic fatalities increased from 10,142 in 2019 to 13,384 in 2021. Total traffic fatalities likewise increased from 36,096 in 2019 to 42,915 in 2021. 

Rates are also affected by things drivers can’t control, like their neighbors. 

A report by Progressive, an insurer, states that drivers’ rates can go up simply because of an increase in claims in their surrounding area due to collisions, car thefts, or bad weather. 

And even good drivers can end up paying very high premiums due to a low credit rating. A driver with poor credit currently pays an average of $4,349 per year for a full coverage policy, compared to $2,348 for a driver with a good credit rating, Martin said. By comparison, a driver with a DUI arrest pays $4,557.

The Teen Premium

Another reason for high rates is having teen drivers on your policy. Teenagers typically pay higher rates because of what insurers see as less experience and a higher appetite for risk-taking. 

One report estimates that the cost of adding a teenager to a family’s car insurance policy averages $3,594 per year and could increase the total policy premium by as much as 135 percent. These rates come down when a person reaches the age of 25. 

Based on her experience as an insurance underwriter, Martin has advice for parents, including having a heart-to-heart with teens even before they get a license.

“Talk to your child about safe driving. Be a good example and have a plan in place,” she said. “Are they going to help you pay for the insurance? Can they understand how much a speeding ticket might cost and how much that might increase your rate? Will they help you pay for that increase?

“Another thing I know parents would do is they would buy their child a brand new car with all the safety features, which is great,“ she said. ”But those safety features don’t outweigh the cost of having a car with collision coverage.”

New cars, if financed, must include collision coverage (damage to your car) in addition to liability insurance (damage to others), and collision is usually the most expensive component of the insurance package. Better to have your teens drive a safe, used vehicle and forego the collision coverage, which can add thousands of dollars to your premiums, Martin said.