The cost of insuring a vehicle in the United States is rapidly rising due to several factors.
If there’s anything Americans are getting used to seeing at the moment, it’s increases in their auto insurance premiums. Looking back at the trends from 2022 and looking forward to what is expected in 2023 has meant considerably higher costs associated with insuring a new or used vehicle.
This year has seen the largest rate increases recorded in the United States since 2019.
As was recently reported by Live Insurance News, there have been tremendous increases in auto insurance premiums over the last few years. For the ten years leading up to the pandemic, the cost of insuring a new car rose by an average of about 3 percent per year. In 2019 to 2020, that figure rose to 5 percent. From 2020 to 2021, that figure spiked to 17.2 percent, as we reported last week. The situation wasn’t much different for used vehicles.
This trend is only expected to continue into next year. A recent PropertyCasualtyReport article predicted that 2023 will bring another 12 percent average increase to the amount people are paying to insure their vehicles.
There are many reasons to explain why auto insurance premiums are skyrocketing in recent years.
Vehicle rates are calculated on several different factors. While there are many factors associated with the individual driver, such as age, driving history, gender, education level, credit score, and others – all dependent on the state – there are other factors that also play a substantial role in how much a driver will pay for auto insurance premiums. It is those additional factors that have come to the forefront of the calculation in the last few years.
Inflation is the issue getting the most media attention at the moment. Currently, the cost of repairing or replacing a new car is rising very quickly. As a result, rates are rising to keep up with the cost of those payouts. As inflation stabilizes, that factor will stop being as much of a contributor to coverage rates.
Supply chain disruptions have also created an issue sending rates upward. Certain vehicles and parts are difficult to come by. While the demand has dropped because people are working from home more and driving less overall, the availability has dropped even further, sending prices upward and meaning that coverage needs to be more expensive to close the gap that formed.
Labor shortages are another issue sending auto insurance premiums upward. When it’s more difficult to hire, it means that there is greater competition among insurers to draw workers. As a result, they need to make it more appealing to work for them and to remain an employee. This is costly in both salary and benefits, again, driving rates upward.