Why Did My Car Insurance Rates Go Up?

If your car insurance rates have gone up recently, you’re not alone. According to a report from the Bureau of Labor Statistics, the average price of motor vehicle insurance rose more than 22 percent over the last year — that’s faster than at any time since the 1970s. But what’s driving these increases? A few items to consider are the supply chain constraints and labor shortages, the complexity of newer vehicle features, rising car theft and vandalism of targeted makes and models.

This blog will help you understand where auto insurance rate increases come from — both for you individually and in the broader insurance market.

Why Are Auto Insurance Rates So High?

Increases in car insurance rates are driven by a wide variety of factors. Some of them are unique to individuals, and some of them are driven by the broader marketplace in your state or region. Even worldwide issues, such as Covid-related supply chain disruptions, have affected the industry.

Let’s look at some of the primary contributing factors, starting with the broader regional ones.

Market Conditions & Other Influences

Inflation

It’s no secret that inflation has been driving up prices across the economy for several years now. As the cost of parts and labor for auto repairs have gone up, the cost to insurers to pay out claims has risen as well.

Dramatic Increase in Drivers on the Road

As populations in metropolitan areas increase, so do the number of drivers, the density of traffic, and, consequently, the risk of accidents. Florida in particular has seen a significant influx in population in recent years. That means busier roads and highways than ever before, and 26.7% of the population doesn’t have car insurance.

Rising Frequency of Accidents

The increase of drivers on the road has led to more accidents. Collision incidents in Florida are up 42% and the cost of repairs and replacement parts is up over 13%. This is a huge driver of market conditions.

Complexity of Vehicles

New vehicles are more technologically sophisticated than ever before — and much of that technology makes driving safer. However, the consequence of all this new tech is that even small accidents can cause hundreds or thousands of dollars’ worth of damage to delicate electronics that require specialized repair and replacement.

Rising Car Thefts & Break-ins

Vehicle theft is a serious problem. Across the U.S. in 2020, a vehicle was stolen every 36 seconds on average, and rates of thefts and break-ins have remained high since.

Rising Healthcare Costs

Auto insurance companies don’t just cover vehicle repairs; they also cover related healthcare costs, which have increased dramatically in recent years.

Increases in Litigation and Fraud

Rising rates of fraud and litigation continue to impact insurance rates and taxes, inflating prices across the board. This is especially true in Florida, which has 78% of all litigation cases in the country (you’ve seen the billboards and commercials).

Personal Factors & Driving Record

The items listed above are all new and growing trends in the broader automobile insurance market, but there are also other reasons specific to individuals why your car insurance rate could have recently increased.

Tickets

Traffic violations like speeding or running red lights signal risky behavior to insurers. If insurers think you’re likely to cause an accident, they’re more likely to raise your rates.

Accidents

Being involved in an accident suggests increased risk, regardless of who’s at fault. Even if your insurer covers the damages, your premiums are likely to rise due to the perceived higher likelihood of future claims.

Comprehensive Claims

Comprehensive claims for non-collision events such as theft, vandalism, or weather damage can help you financially, but insurers still take them as signals of increased risk. Multiple claims in a short period can lead to higher rates.

Adding Drivers

Each driver on your policy adds risk. Teenagers, especially, have higher accident rates, so adding one to your insurance policy can result in a substantial premium increase. Adding any drivers with a poor record will also raise your rates.

Moving

Insurance rates vary by location based on factors like crime rates, traffic density, and weather conditions — even the length of your commute! Moving to an area considered riskier or where you’re expected to regularly drive farther will generally lead to higher premiums.

Age

Young and elderly drivers are statistically more prone to accidents, so insurers charge them higher rates. As you age and gain experience, your premiums generally decrease, but they may rise again as you enter your senior years.

Loss of Discounts

Many insurers offer discounts for safe driving, good grades (for students), bundling policies, completing defensive driving courses, or having safety features on your vehicle. Losing any of these discounts due to changed circumstances will increase your premiums.

Insurance Scores and Rate Increases

Auto insurance is a crucial part of being a responsible vehicle owner. It provides financial protection if you get in an accident, experience theft, or encounter other circumstances common to owning and driving a vehicle.

However, navigating the auto insurance market can be difficult. For example, your insurance score may affect your rate. Representative of your risk profile as a driver, your insurance score is based on factors like driving record, credit history, and other data. Unfortunately, rate increases may have everything to do with your score. They may also have nothing to do with it at all.

What’s a Good Auto Insurance Score?

The exact range of a good auto score varies depending on the scoring model used by the insurance carrier. A higher score shows that you are a good and responsible driver with a low risk profile. This can absolutely lead to lower premiums, subject to market conditions. The common factors that insurers use to figure out if you have a good auto insurance score or not are the following:

• Credit History
• Driving Record
• Vehicle Type
• Coverage History
• Demographic Factors

Once these factors are taken into account by the insurance provider, they aim for a score ranging from 700 to 850 as the benchmark for a reliable policyholder.

Does Credit Score Affect Car Insurance?

Yes, credit score absolutely affects your car insurance, along with your auto insurance score. Insurers have found direct correlations between one’s credit history and the likelihood of filing a claim, so many insurance companies use information in your credit report to help determine the likelihood that you’ll file a claim.

The use of credit scores in insurance underwriting varies by state and is subject to various regulations. Individuals with lower credit scores are more likely to get charged higher premiums for their auto insurance compared to those with higher credit scores. Drivers with lower credit scores are statistically more likely to miss payments and file claims. Those individuals are considered a high risk for an insurance company.

Fluctuations in Florida’s Insurance Market

Auto insurance markets are influenced by broader market trends. Let’s take Florida, for example. The property market in Florida has been extremely difficult for several years due to multiple major hurricanes, including Ian in 2022, which was the third-costliest hurricane in U.S. history. While natural disasters affect both the property and auto insurance markets, the catastrophic losses these insurance companies end up paying for in the property market get made up somewhere. Rates inevitably increase in other areas, like the auto insurance market, so the insurance providers can stay in business after paying out massive claims elsewhere.

While it seems like one should not affect the other, the insurance marketplace is like a carousel. Rates are constantly moving up and down based on market conditions that are largely out of your hands.

Let Us Help You Find the Best Rates

Car insurance is designed to protect your finances in the aftermath of an accident, so lowering your coverage could leave you with higher out-of-pocket bills. In an inflationary economy where nearly everything costs more, proper car insurance can help you hang on to more of your hard-earned dollars if and when you file a claim.

However, with that said, there are some ways to potentially take the sting out of any increase. Maintaining a good driving record, monitoring your credit score, and taking advantage of discount opportunities can all help to get you started on improving your auto insurance rate.

Contact your insurance advisor or our Personal Insurance Service Team to learn more about measures you may want to consider, such as adding telematics (if available) which may reduce premiums based on driving behaviors. Other options include defensive driver courses and reviewing deductible options. At W3 Insurance, we’re dedicated to working with our clients to find insurance policies that work for them. Contact us today to request a quote!