Car Insurance Rates Jump 20.3% From A Year Ago But Show Signs Of Easing

The cost of car insurance remains sharply higher than it was a year ago. Auto insurance premiums climbed 20.3%, year over year, in May according to the latest Consumer Price Index from the Bureau of Labor Statistics. That far outstrips last month’s overall inflation rate of 3.3%.

But the CPI report provides a glimmer of hope for hard-hit consumers. Car insurance rates dipped slightly—0.3%—from April.

Still, on an annual basis, car insurance price hikes have exceeded 20% for the past six months.

“We haven’t seen these kinds of increases from a CPI standpoint since 1976. This doesn’t happen often,” says Tim Zawacki, insurance sector strategist for S&P Global Market Intelligence.

In a new report, Swiss Re Institute economists predict that price increases for personal car insurance policies are near their peak and will flatten out in the coming months. They suggest that improved profitability and increased competition will lower car insurance costs for consumers over the next couple of years.

U.S. drivers pay $2,150 a year, on average, for full-coverage car insurance, according to a Forbes Advisor analysis.

Why Is the Cost of Car Insurance So High?

Experts say a number of developments play a role in soaring auto insurance rates. They include:

• Higher repair costs. Rising prices for parts and labor are pushing up the cost of fixing damaged vehicles. And many newer cars are equipped with sophisticated devices, such as cameras and sensors, that are expensive to fix or replace.

“While helpful technology in the car may be great when we’re behind the wheel, if damaged, its repairs are pricey because of the need for specialized equipment and mechanics,” says Penny Gusner, Forbes Advisor senior insurance analyst.

“Higher repair costs translate into auto insurers paying much more each year on claims, which is passed down to you,” Gusner adds.

• More expensive accident claims. The cost of car insurance claims, both for property damage and injury, has been rising steadily since the pandemic, according to the Insurance Information Institute.

• An increase in auto theft. Car theft rates have been climbing since 2019. More than a million vehicles were stolen in the U.S. last year, up 1% from 2022, the National Insurance Crime Bureau said in its 2023 Vehicle Theft Trends report.

• More severe storms.  A rise in catastrophic weather events is causing more vehicle damage from hail, wind, floods and fire.

“There are so many different underlying issues that they’re not easily solved collectively,” Zawacki notes.

How To Save Money on Car Insurance

While prices aren’t showing signs of dropping just yet, these five moves can help you get the cheapest car insurance possible:

1. Shop around. Compare car insurance quotes from several companies.  The number of drivers shopping for the best deal on auto insurance is up 6% from a year ago, according to a TransUnion report. “Auto insurance customers are starting to shop for insurance like they shop for gas,” Stephen Crewdson, senior director of insurance business intelligence for J.D. Power, said in a statement. “They are taking a much more active stance in seeking out plans that fit their needs and their budgets.”
2. Bundle policies. Insurers will often offer a discount if you bundle your auto and homeowners insurance policies with them.
3. Track your driving behavior. Usage-based insurance (UBI) measures your speed, hard braking, mileage and other driving habits and assigns you a score. If your score is good enough, you could get a lower rate. But before you enroll in a UBI program make sure your rates can’t go up if your driving doesn’t score well.
4. Raise your deductible. If you increase your deductible for collision and comprehensive coverage, your premium will typically go down. But keep in mind that you’ll pay more out of pocket if you submit a claim.
5. Ask about discounts. Many car insurance discounts are applied automatically, like a discount for paying your full insurance bill up-front. Ask your agent about other discounts. For example, you may be able to snag small discounts for going paperless or using electronic funds transfer for payments. If you have a high school or college student on your policy who gets good grades, ask about a good student discount.