Auto insurance rates continued their upward trend last year, with major insurers increasing rates by 15% or more from 2022 levels. This rise is driven by factors such as higher repair and replacement costs, more destructive natural disasters, and losses in insurers’ auto insurance businesses.
The top 10 private auto insurers raised rates by 22.8% to 34.7% in 2022 and 2023 compared to rates in 2021. Factors contributing to these hikes include:
- Repair Costs: Vehicle maintenance and repair costs rose by 10.7% in 2023, fueled by higher auto parts prices, labor shortages, and the complexity of repairing newer vehicles with advanced technology.
- Natural Disasters: Increasingly severe natural disasters, like wildfires and hurricanes, have led to more auto losses. In 2023, 28 natural disasters caused over $1 billion in losses each, including auto losses.
- Vehicle Prices: The average price of a new car reached $47,936 in October 2023, up from $38,000 in October 2018, due to supply chain shortages, resulting in higher costs for insurers.
- Road Safety: Fatal car crashes in the United States increased by nearly 18% from 2019 to 2022, with pedestrian fatalities reaching their highest level since 1981 in 2022.
- Car Thefts: Motor vehicle thefts increased by 29% in 2023 from 2022, reversing a long decline and adding pressure on insurers.
To mitigate rate increases, consumers can bundle policies, maintain clean driving records, raise deductibles, and choose less expensive vehicles. However, reducing coverage to the minimum required by the state is not advisable, as it may not cover costs in a severe accident.
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