Why Are Auto Insurance Rates Going Up?
Auto insurance rates have been steadily increasing over the past few years. There are several factors contributing to this trend that are important for drivers to understand.
Increased Costs of Repairs and Medical Care
When you get into an accident, the costs to repair vehicles and provide medical care have gone up significantly. New cars now have more technology and sensors, making them more expensive to fix after collisions. Additionally, healthcare costs continue to rise faster than inflation. Since auto insurance covers these expenses for policyholders, insurers have to charge more to keep up.
More Distracted Driving Accidents
Despite laws against texting and driving, many motorists continue to use their cell phones behind the wheel. This distracted driving causes more accidents, injuries, and claims that insurers must pay out. Insurance companies have reacted by raising rates. According to industry research, distracted driving adds about 16% to the cost of auto insurance.
Rise in Insurance Fraud
Insurance fraud happens when people stage accidents or file exaggerated injury claims to try and get bigger insurance payouts. The National Insurance Crime Bureau reports that fraud adds $300 per year to the auto insurance premiums paid by U.S. households. Insurers protect against fraud by charging more across the board.
Increased Costs of Vehicle Repairs
Modern vehicles now have more expensive parts like sensors and electronics. Replacement parts can cost much more than for older cars. Insurers factor in these higher potential repair costs when setting rates. High-end vehicles that are more expensive to fix tend to have pricier insurance premiums.
More Natural Disasters
Extreme weather events like hail storms, floods, and hurricanes cause billions in vehicle damage each year. As climate change potentially increases these disasters, losses for insurance companies mount. In turn, they pass some of these expenses along through higher premiums. Areas at high risk for natural disasters tend to have the costliest auto insurance rates.
Rising inflation also plays a role in increasing auto insurance costs. As the costs of goods, repairs, medical care, and claims rise, insurance companies will continue raising premiums to keep pace. For these reasons, drivers should expect to keep paying more for the coverage they need. Shopping around and maintaining a clean driving record are some of the best ways to find more affordable rates.