Why are Car Insurance Rates Increasing?
Auto insurance rates have increased 17% to 19% just over the last year due to several factors.
According to the U.S. Bureau of Labor Statistics Consumer Price Index, auto insurance rates have increased more than 17% to 19% over the past year. As a result, all drivers across the country, including here in Michigan, have seen car insurance rates climb by 5%, 10%, or even 20%. This phenomenon reflects the biggest annual increase since 1976.
While part of the explanation lies in various features that we’ve come to rely on – such as anti-lock brakes and backup cameras – becoming more and more advanced over time, this also correlates with more expensive car repairs, which also increased by approximately 20% over this last year. In addition, with medical costs increasing, the cost of claims necessarily increases as well. When insurance claims become more expensive, insurance premiums do as well.
COVID-19, Climate Change, and Reinsurance Rates
Additional factors that can and have caused insurance rates to increase include climate change, the pandemic, and the cost of reinsurance. This is because:
- After people started going back to work in 2020 to 2021, there was an increase in the number of accidents on the roads, especially fatal accidents (which then drives up the cost of insurance rates)
- Wildfires, floods and sever storms - both connected to climate change - make affected areas more expensive to insure, which then leads to an increase in insurance rates. Thus far, there have been a number of climate- and weather-related events, causing approximately $1 billion in damage (which then, of course, increases insurance rates)
- The reinsurance industry helps insurers pay claims, and the cost is increasing, which then comes back to cause state auto insurance rates to spike
With insurance companies having to cover more overall claims because of these events, they are left with higher losses, causing them to raise rates, or sometimes even pull out of areas altogether that are prone to extreme weather.
Certain other factors that have, in some areas, led to an increase in auto insurance rates have included poor credit rates, supply chain cost increases, driving records, locations, and external financial trends.
What Can I Do?
There are some simple steps to ensuring that you are saving as much as possible on your auto insurance, such as:
- Bundle multiple policies, where possible
- Opt into paperless communication
- Be careful about lowering your coverage or dropping insurance altogether in order to save funds each month, but raising deductibles can reduce your premium
- Ensure you are receiving the benefit of every applicable discount by connecting with an insurance professional, who can help connect you with the right policy
We Can Help With Auto Insurance Today
Hartman Insurance proudly serves Ann Arbor and Saline and surrounding counties. We are committed to helping our clients and their families feel safe and secure with their coverage. Contact us today to learn more.