From toilet paper to a gallon of milk, it seems like just about everything got more expensive during the pandemic. Not car insurance, though; those prices actually fell for a while. Now that things are returning to normal, however, auto insurance agencies are introducing price hikes all over the place. This doesn’t mean that you can’t still get a good deal when insuring your car; you just have to make sure you’re working with the right agency. For example, getting your auto insurance from a place like the Brad Siok Insurance Agency Inc. of Peoria, AZ means that you’ll get the most comprehensive insurance policy for the best price.
If you’re like many Americans, you’ve already seen your car insurance rates go up. A lot of people will stick with what they already have, but some are deciding to look for better deals elsewhere. Fortunately, the auto insurance market is still flexible for now. Even though many agencies are feeling the pressure to raise their rates, not all of them have decided to take that step.
The question is, why is this happening now? It’s the result of several different factors, all of which converged at once to drive up auto insurance rates.
What’s happening with auto insurance rates in the US?
A couple of years ago, car insurers were issuing billions of dollars’ worth of discounts and rebates because of the pandemic. These days, the rates aren’t just bouncing back – they’re increasing past their pre-pandemic levels, with some of them going up by as much as 12%.
One factor that governs the rate increases is the insurance company issuing them. GEICO increased 12 different rates in six states last November, while Allstate hiked 20 rates in 13 states. Progressive Corp. had the most rate hikes of the three, with 38 of them in 10 states. According to The Zebra (an insurance comparison site), there were rate hikes in 38 states; looking at the nationwide average, they show an increase of 3%.
Why are car insurance rates going up?
A surprising number of factors are related to the pandemic, but not all of them. For instance, car insurance rates went down during the pandemic because people were driving fewer miles. Now that everyone’s back on the road, the rates are being adjusted accordingly. Then there’s the microchip shortage that’s causing delays in the car manufacturing industry, which has an effect on the car insurance market as well. Even the weather seems to be conspiring to raise auto insurance rates.
- Traffic accidents are increasing, so car insurance rates are too. People just aren’t using as much caution on the roadways as they used to, and the consequences of that are evident in car crash statistics. By the first half of 2021, there had been a total of 20,160 traffic fatalities in the US, which is 18.4% more than the same period in 2020. Determining factors for car insurance rates are not only the frequency, but also the severity of traffic accidents, and 2022 isn’t looking good for either of them.
- The costs to buy and insure vehicles are going up. The value of a vehicle will influence the cost of insuring it, and the last couple of years have seen drastic increases in the costs of both new and used vehicles. 2021 saw an increase of 11.8% in new car prices, and an increase of 37.3% in used car prices. There simply aren’t enough new cars to meet demand thanks to microchip shortages and shipping delays; when people can’t get a new car, they try to find a used car instead. Demand for any vehicle that runs is sky-high, and this affects not only car prices, but car insurance prices as well.
- Auto theft is on the rise. It isn’t just cars that are becoming more valuable; it’s car parts as well. From 2020 to 2021, insurance claims for stolen converters were up about 293% in the US. If someone steals the vehicle itself, they could potentially make thousands of dollars by selling the parts separately, which gives them more incentive to go for the bigger haul. If an insurance company has to replace stolen cars or car parts, it costs more than ever because of shortages and delays in the auto manufacturing industry.
- Severe weather patterns are putting more pressure on profit margins. Among many other things, auto insurers have to consider the likelihood of damage due to extreme weather when setting their rates. For most states, the weather patterns are stable enough that they don’t cause many fluctuations in car insurance rates. In 2020, insurance companies reported $1 billion in insured losses due to weather. That changed in 2021, however, as severe winter storms swept through multiple states, causing $15 billion dollars’ worth of damage that insurance companies had to pay for. For the most part, this was caused by two storms that took place in February of 2021.
Car insurance rate hikes will vary across the states
Not everyone will end up paying more to insure their vehicles; it could depend on what state they’re living in. The factors mentioned above are affecting the entire nation, but some states have it worse than others. Vehicle shortages are pretty consistent no matter where you live, but weather patterns, theft rates, and driving habits vary from one state to the next.
While it’s true that auto insurance is going up in general, it’s important to realize that this isn’t a universal phenomenon. The average prices are up slightly, but the really insane rate hikes are linked to specific areas where crime, weather patterns, or driving statistics are influencing them.
If you’ve been affected by rising auto insurance rates, maybe you should check out your other options. You might discover another policy that fits your needs and budget better; or, you might actually find out that you’re doing pretty well compared to what you could be paying. Prices might be rising in general, but with a little research and some good luck, you may find a better deal for your next auto insurance policy.