Car owners are facing troubling news as a recent report indicates auto insurance rates will keep climbing in 2024.
The report from Insurify highlights that the average auto insurance policy in the U.S. is projected to increase by 22% this year. The average annual premium nationwide will be $2,469.
In the first half of 2024, we have seen a 15% increase in full-coverage car insurance rates.
Some Americans pay as much as 5% of their household income on car insurance.
This projected increase follows a staggering 24% rise in 2023, indicating a troubling trend for motorists.
There are three states that are showing staggering projected car insurance rate hikes.
- Minnesota – 61% rate hike
- Missouri – 55% rate hike
- California – 54% rate hike
There are many factors driving these sky-high rates.
- Vehicle theft rates
- Traffic congestion/density
- Car accident rates and deaths
- Weather
- Insurance fraud rates
Maryland has the highest annual full-coverage car insurance rates. The state recently saw a 43% year-over-year rate increase, which is in part due to an 8% increase in traffic fatalities in 2023.
In South Carolina, drivers have also faced a significant increase in premiums. Part of the reason is that there are higher-than-average fraudulent insurance claims.
Climate change is impacting insurance rates
Traditionally, climate issues have impacted insurance for homeowners, not drivers. But times are changing.
Weather events are increasingly determining insurance rates. The number of natural disasters causing $1 billion or more in damages is growing, and insurers need to offset the cost.
The average number of $1 billion weather events per year between 2010 and 2019 was 13.1. That number has jumped to 20.4 for 2019-2023.
The average costs incurred by these events were $98.8 and $123.2 billion respectively.
In 2022, 52% of all insurance vehicle claims that resulted from Hurricane Ian were total losses.
“I think climate risk will likely start to play a role in new areas. As we experience tornadoes, hail, and flooding in places where they weren’t necessarily a major threat before, the increased frequency and severity of these events will need to be considered in pricing,” said Betsy Stella, vice president of carrier management and operations at Insurify.
Cars with more technology are more expensive to repair
As the car industry focuses on more computer integration and EV technology, car repair costs can expect to skyrocket.
When an older car gets rear-ended, a bumper repair is usually all that is needed. On newer cars, however, there may be technology in the back that requires much more costly repairs and parts.
According to the BLS CPI, car repair costs have increased almost 38% in the last five years. The hours needed by mechanics to do auto repairs on newer cars have risen by 40% per claim in the last ten years.
Electric vehicles are contributing to the high numbers. It is estimated that they take 5.8 days longer to repair than gas-powered cars, which adds an estimated 47% more to the repair costs.
The difference between insuring older and newer cars is drastic, as seen in the chart below.
As insurance companies continue to look for ways to boost profits, we may see changes to pricing strategies.
Evaluating policyholder behaviors may be a higher priority with telematics-based insurance. This would allow insurance companies to track drivers with an app to see how they interact on the road.
Lots of braking and speeding may increase the driver’s rates, while those obeying the laws will see better rates.
According to Progressive’s Snapshot program, which currently uses telematics, drivers can save an average of $231 annually.
This seems to be a better approach than the current system of basing pricing on gender, residence, or credit. But will Americans use the “bring tracked” feature just to save a few dollars?
Sources:
- https://www.cccis.com/news-and-insights/posts/crash-course-2024-tackles-vehicle-complexity
- https://insurify.com/car-insurance/report/
