Why is my Car Insurance Going up?

By Nancy B
December 06, 2022

 

 

 

 

 

 

 

The Northern Neck Insurance Integrity Promise

We pledge to provide straight talk and good counsel from our NNINS Virginia insurance experts through our blog. While we hope you find this to be a helpful source of information, it does not replace the guidance of a licensed insurance professional, nor does it modify the terms of your Northern Neck Insurance policy in any way. All insurance products are governed by the terms in the applicable insurance policy.

Why is my Car Insurance Going Up?

If you notice your car insurance rate jump for your 2022 policy renewal, you are not alone. Nationally, car insurance rates are increasing on average by 4.9% due to record inflation affecting over 62 million policyholders and more than half of all Virginians, including our own members. Inflation is not the only culprit here. Pandemic-related supply chain struggles and an abrupt change in dangerous driving behavior are among the economic and societal influences impacting the personal insurance industry. We are seeing the impact on both home insurance and auto insurance. 

Factors that Cause Auto Insurance Rates to Increase

How supply chain issues are affecting car insurance rates

When the pandemic hit, many industries halted purchases and production to match lower demand, including car part manufacturers. Computer chips, needed for everything from entertainment systems to power steering, are one example of the existing supply chain deficits. As car parts needed for new cars and repairs became increasingly scarce, the demand has also increased, leaving car repair shops with a growing backlog of work.

Man putting car parts on shelf

The shortage of chips and other car parts has also inflated car insurance claims. A car bumper that used to sell for $500 is now $800, lowering the economic threshold for qualifying a vehicle as totaled vs. worth repairing. The Consumer Price Index (CPI) rose more than 7 percent compared to 2020 – the biggest increase in nearly 40 years. At this rate of inflation, we are buying the same goods and services for 7% more than we were a year ago. Prices for used vehicles jumped more than 27% in 2021, according to the auto industry analysts at Edmunds. New vehicle prices are up more than 14%. More expensive claims lead to car insurance premium hikes for everyone. 

How the shortage of repair technicians is affecting car insurance rates

On top of the challenges with the supply chain, auto repair businesses have not escaped the national labor shortage. While insurers could stay active with remote work plans and automation, the car repair industry needed skilled technicians on site. In addition, there were fewer drivers on the road resulting in fewer repairs needed during the lockdown. Like many service industries, the talent pool shifted and has not completely rebounded.

Car Crash with Emergency Responders

How driving habits are affecting car insurance rates

As we hunkered down at the start of the pandemic in early 2020, driving levels reduced significantly. Many stopped commuting to work, school, and other activities. As a result, many insurance companies refunded some premiums to policyholders, including NNINS. But while pandemic restrictions reduced traffic volume, driving behavior began to change and has continued to impact road safety.

Higher speeds, more serious accidents, and higher-than-average claim severity have been at the highest percentage increase on record. While the National Highway Traffic Safety Administration's (NHTSA) new first quarter 2022 data shows that the number of U.S. highway deaths increased by seven percent overall, increases in Virginia were over 70%!

NHTSA) new first quarter 2022 data

This pendulum swing of driving habits has resulted in the depletion of funds set aside and earmarked for paying losses. Insurance carriers must rebuild their claim reserves and thus, higher premiums for many. 

Will Car Insurance Rates Go Up in 2023?

They could go up, and they could go down. Car insurance rates routinely fluctuate, and as inflation returns to lower levels and supply chain issues are resolved, premiums may drop again. It's important to do all you can to keep your rates down with good driving habits and minimize the potential for car insurance claims.

Ways to Save Money on your Car Insurance

Keeping your car insurance policy in force is still the best course of action even when your car insurance rate increases. Talking with your local insurance expert about your unique insurance circumstances is a great way to understand how your policy is priced and ways to save money on car insurance. Comparison shopping with an independent agent is essential to obtain the best cost for the amount of coverage that fits your needs. 

Two women discussing a new insurance policy

Consider More Than Rate When Shopping for Car Insurance

While rate is important, especially with overall inflation, it also shouldn't be the only factor considered when shopping for car insurance. Cheap car insurance can result in compromised coverage that could put you at risk for high out-of-pocket costs should you get into an accident. We take great pride in providing above-average claims service, the best local insurance experts, and teams that care about you and your family as if you were our own friends and family. Read our story and consider trusting us with your home and car insurance needs.

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