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Why is my Car Insurance Going Up?
You are not alone if you noticed your car insurance rate jump with your 2022 or 2023 policy renewal. Nationally, car insurance rates are increasing on average by 15-20% due to record inflation affecting over 62 million policyholders and most Virginians, including our own members. Inflation is not the only culprit here. The fallout of pandemic-related supply chain struggles and an abrupt change in dangerous driving behavior are among the most impacting economic and societal influences on the personal insurance industry. We are also seeing an impact on home insurance rates due to unparalleled increases in housing prices and construction materials.
Factors that Cause Auto Insurance Rates to Increase
How supply chain issues have affected car insurance rates
When the pandemic hit, many industries, including car part manufacturers, halted purchases and production to match lower demand. 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.
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 more than $800, lowering the economic threshold for qualifying a vehicle as totaled vs. worth repairing. In addition, parts in vehicles now include expensive technology features. Replacing a side mirror used to be $500 - now it’s more than triple that.
The Consumer Price Index (CPI) rose more than 7 percent in 2021 compared to 2020 – the biggest increase in nearly 40 years. At this inflation rate, we bought the same goods and services for 7% more than we had a year before. In 2023, car repair prices are at a 48-year high. According to the auto industry analysts at Edmunds, prices for used vehicles jumped more than 27% in 2021. 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, fewer drivers were on the road, resulting in fewer repairs during the lockdown. Like many service industries, the talent pool shifted and has not completely rebounded.
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, impacting road safety. Traffic fatalities began increasing nationwide even though fewer people were driving, and overall traffic accidents dropped. Drivers were also more likely not to wear a seatbelt or to be under the influence of drugs or alcohol.
In 2021, 968 people died in Virginia in car crashes, with speed listed as the cause for nearly half of them. Not wearing a seatbelt was the second-leading factor in fatal car crashes, and driving under the influence of alcohol was third. The causes were very similar in 2021 and 847 Virginians died on the road.
Higher speeds, more serious accidents, and higher-than-average claim severity continue to affect car insurance rates. The National Highway Traffic Safety Administration's (NHTSA) first quarter 2022 data showed that the number of U.S. highway deaths was estimated to increase by seven percent overall, while Virginia's percentage change for fatalities was estimated to increase by over 70%! The number of accidents, claims, and payouts increased, creating a depletion of funds for paying losses. Insurance carriers must rebuild their claim reserves and, thus, charge higher premiums for many. On average, most carriers have gradually increased their car insurance rates by more than 20% by the second quarter of 2023 to close the loss ratio gap in Virginia and nationally. Some carriers are even opting to stop writing new car insurance in certain states.
Ways to Save Money on Car Insurance
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. Driving safely and avoiding traffic infractions and car crashes is more important than ever. In 2023, one point on your Virginia driving record could result in a 25% increase in premium to insure the higher risk of collision. You may be tempted to drop coverage, but keeping your car insurance policy in force is still the best financial protection 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.
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.
Learn more about car insurance in Virginia
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.
