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Bad Driving, Repair Costs Strike Auto Insurance

How to beat rising premiums

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If you think the price of food is soaring, wait until you get your new insurance premium. The average annual cost of full-coverage car insurance rose to $2,543 in 2024, an increase of 26 percent over last year, according to In comparison, the government’s Consumer Price Index rose 3.4 percent in 2023, and the cost of food rose 2.7 percent.

Insurance industry experts report that overall inflation isn’t the biggest influence on current auto insurance premiums but rather behaviors by risky drivers that have hurt policyholders. Here’s why premiums are rising — and what you can do to keep your costs lower.

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During the pandemic, fewer car accidents occurred, since fewer drivers were on the road. Their driving didn’t improve once the pandemic was over. The National Highway Traffic Safety Administration estimated that 19,515 people died in traffic accidents during the first half of 2023 — a big increase from 17,065 killed in the same prepandemic six-month period in 2019.

One cause: Distracted drivers. “People are driving erratically on the road more often today than before the pandemic,” says Loretta Worters, vice president, media relations, for the Insurance Information Institute. “The average amount of distracted drivers rose 30 percent between 2019 through 2023,” she said.

Some are just driving too fast. Major speeding violations in 2022 were more than 20 percent above 2019 rates, according to the latest data available from the LexisNexis U.S. Auto Insurance Trends Report. And driving while drunk (or otherwise impaired) is another type of risky driving behavior that has fueled higher injury and collision claims costs. DUI levels in 2022 were about the same as those in 2019, but LexisNexis expects that number to grow.

Expensive repairs

Here’s where inflation comes into play. Because the prices of most consumer goods and services have jumped the past several years, repairing damaged vehicles costs more. Skilled labor rates and the cost of materials to repair cars are up. As a result, policyholders can expect to pay more for auto coverage because of inflation. No policyholder living in any U.S. state has escaped the impact of higher insurance rates.

“Cumulative years of record-high inflation have greatly increased the cost of repairing and replacing cars,” says Robert Passmore, department vice president of personal lines at the American Property Casualty Insurance Association. “Over the last five years, the cost of car parts and used cars and trucks increased nearly 40 percent. The cost of vehicle repairs increased by more than 20 percent,” he said.

Buying a new car?

In today’s inflationary environment — whether rising or cooling a bit — the cost of purchasing a vehicle is up. According to AAA’s report “Your Driving Costs,” the average MSRP in 2022 for a new vehicle was $33,301. And the newer the vehicle, the more it costs to insure it.

Newer vehicles have sophisticated, complex technology systems. Vehicles with advanced technology, like cameras and sensors, require more parts to be replaced, higher labor costs and additional operations for scanning and calibration of systems. “This means that repair costs have risen to their largest year-over-year increase,” Passmore added. “These more complex and expensive repairs are also taking longer, and that shows up as higher rental vehicle costs.”

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Passmore noted elevated auto repair and replacement costs should stretch well into 2024 and beyond. He said insurers are encouraging drivers to reduce their risk by avoiding distracted driving, speeding and impaired driving that could result in a car crash.

“Insurers are advocating for better infrastructure, including reliable supply chains for critical auto parts and safer roads, which should result in fewer crashes, controlled claims costs and affordable insurance premiums,” he added.

Theft and fraud

For the first time in history, more than 1 million cars were stolen in the United States in 2022, according to the Insurance Information Institute; and the National Insurance Crime Bureau reports that in the first half of 2023, almost half a million vehicles nationwide were reported stolen. One of the biggest reasons auto thefts have increased is because of catalytic converters: The metals used in a catalytic converter are extremely valuable, in high demand and can be resold by thieves.

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Another indicator influencing auto insurance rates is false or exaggerated claims. The number of people reporting erroneous information is increasing because they seek a larger payout from their insurer. As this type of fraud increases, auto insurance companies are raising rates to make up for the losses from the false claims.

How to control your costs

Insurance underwriters calculate auto insurance premiums for a driver based on risk and rating. In the underwriting process, they assess a policyholder’s driving record, the number of miles driven, and where the car is parked. Driver age and gender and the make and model of the car are also factors in the price of an auto insurance premium.

These results determine a premium price based on what it may cost to absorb a potential claim by the policyholder. The more frequent the claims, the higher the risk, and the higher insurance rates a policyholder will pay. Since older drivers experience fewer accidents than less experienced, younger drivers, they often pay less in premiums.

One way to save money on auto insurance is to bundle the coverage with other insurance policies like homeowners, renters, boat or motorcycle insurance. Other strategies you can implement include tallying the annual mileage you accumulate. Most insurers assume vehicle owners drive between 12,000 to 15,000 miles per year. If an older auto policyholder no longer commutes to work, the annual mileage falls — and so does the premium.

Here are other tips to keep insurance rates down:

  • Consider a pay-as-you-drive policy. Your premium is based, in part, on the miles you drive. You may also consider a policy that tracks and rates your driving habits. 
  • Set up automatic monthly payments to your insurance company so you don’t get dinged by late-payment penalties.
  • Take an adult defensive driver course.
  • Consider raising your deductible to lower monthly insurance premiums.
  • Let your auto insurance company know if your vehicle has car alarms or antitheft devices to earn discounts.
  • Shop around. Premium prices can vary widely from company to company.

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