Car insurance has increased 43% since 2022. Here’s how to lower your insurance premiums:

“We are hopeful that interest rates will stabilize soon, but that is unlikely to happen until at least 2025,” Bankrate analyst Shannon Martin said in a statement.

According to Bankrate, the national average cost of auto insurance was $2,543 per year as of January, a 26% increase from $2,014 in January 2023 and $1,771 in January 2022.

‘I can barely afford it with a modest income’

Among those who have seen their bills skyrocket is Los Angeles resident Karina Martinez. Her car insurance premium jumped from $121 to $212 per month on her 2013 BMW last year. “I have no accidents, no claims, no tickets. “Because I work from home, I minimize my driving on the weekends,” she said.

Martínez has tried to negotiate lower rates with insurers in the past, but has been unsuccessful. “She just didn’t contest the 2023 rate hike because, in my experience, she couldn’t get any answers,” she told MarketWatch. “She is of no use,” she said. As insurance premiums continue to rise, she said, “It’s hard when everyone is raising their prices. “I can barely afford it on a modest income, and I can’t imagine how people struggling financially will cope.”

Why insurance premiums are rising

The price increase is partly due to insurance companies reevaluating their risk models to account for increased vehicle repair costs and increased claims due to extreme weather, Martin said.

Drivers with low credit-based insurance scores (which predict the likelihood of filing a claim and are different from credit scores used by lenders) are paying an average of $4,338 per year, according to Bankrate.

Steven Crewdson, senior director of J.D. Power’s Global Insurance Intelligence Group, said preliminary filings from insurers to state insurance regulators on rate increases for the first half of 2024 show there could be more increases soon.

If insurers follow the proposed rates, he said, they could be “aggressive” like they were last year, which was already a watershed year for premium increases.

“It’s unlike anything I’ve seen before in over 20 years in the industry,” Crewdson said.

Car insurance is a mandatory purchase in almost every state in the U.S., so insurance companies must get approval from regulators to raise rates.

Paul Newsome, a managing director and senior research analyst at Piper Sandler covering the insurance sector, said the rate increases were primarily driven by rising costs for auto insurers themselves. Repairs will cost more and take more time.

Many insurers have had to raise premiums to make up for billions of dollars lost over the past two years, he said.

“They basically had huge losses leading up to this quarter,” he said. “For many insurance companies, raising prices is not an option.”

An official from the Insurance Information Institute, an organization representing the insurance industry, did not give a direct answer to the question of whether car insurance premiums are expected to rise again this year, but said that car insurance companies are having difficulties due to poor finances this year. last few years.

“There is no question that the U.S. personal auto insurance market is being hit hard by this inflationary environment,” said Scott Holeman, a spokesman for III. “But in addition to inflation, we are seeing a sharp increase in accidents on American roads.”

As the number of crashes increases and more serious crashes occur, losses for insurance companies are increasing, Holeman said. Driving deaths and injuries are resulting in more and more lawsuits, resulting in higher costs for insurance companies. “Litigation has a direct impact on insurance premiums,” Holeman said. Additionally, supply chain issues are still driving up the cost of cars and replacement parts, and cars with advanced technology are more expensive to repair, he said.

Consumers are also feeling these effects. According to AAA, rising vehicle, insurance, fuel and repair costs will increase the monthly cost of owning a car to $1,015 in 2023, up to $12,182 per year, or more than 13% more than the previous year. Households now need to earn about $100,000 a year to afford a new car, MarketWatch reported last fall.

More and more drivers are skipping car insurance altogether.

Car ownership in the United States remains high, but rising costs of ownership have led to an increase in uninsured drivers. According to a JD Power survey, the number of households that own a car but do not have car insurance increased from 5.3% in the second half of 2022 to 5.7% in the first half of 2023. Crewdson told MarketWatch that share declined slightly late last year but rebounded to 6.2% in January.

Uninsured drivers can be fined for not having insurance and can take on many additional risks. The person at fault may have to compensate the other driver and other passengers for their losses, including medical expenses, Crewdson said. If the driver is unable to cover these costs out of pocket, the dispute may be litigated in court.

Bankrate analyzed insurance premiums in 26 metropolitan areas and found that drivers in the Detroit area pay the most in insurance as a percentage of household income ($5,687). It was followed by Miami ($4,213), Tampa ($4,078), Philadelphia ($4,753), and Philadelphia ($4,753). Las Vegas ($3,626).

Meanwhile, drivers in the Seattle metropolitan area had the lowest income share ($1,759), followed by Boston ($2,094), Washington, D.C. ($2,430), Portland ($1,976), and Minneapolis ($2,044).

Doug Heller, director of insurance at the Consumer Federation of America, said he’s concerned that premiums could rise even higher even if insurers’ costs stabilize again.

He noted that in the early days of the pandemic, companies were slow to lower rates or pass on profits to customers. At this time, many drivers were taken off the road and claims costs decreased, increasing margins for insurers.

He said insurance companies pocketed much of the windfall. However, some insurers have offered drivers rebates and discounts on other insurance costs during the pandemic.

“It’s a small difference between us winning heads and losing tails,” he said. “I’m a little worried that even though the costs associated with the insurance policy will go down, I’ll be stuck with high prices.”

With rates rising significantly, more customers will feel they have to reduce their auto coverage or give it up entirely, Heller said.

“I worry these prices will mean more dangerous and less protected roads,” he said.

Tips for lowering car insurance premiums

No. 1: Shop often.

This is probably the most important thing you can do to lower your insurance costs. This is especially true if you’ve had insurance with the same company for a long time, Heller said.

Typically, he recommends consumers look for a better car insurance policy every two to three years. But these days, it’s better to do it once a year or whenever your policy renews.

“It’s not going to relieve all the pain,” he said. However, in some cases, it can help you save up to 30% of the sum assured.

Number 2: Check the mileage registered by the insurance company.

Heller also suggested calling your insurance company to see if your annual mileage estimate is still accurate.

Mileage is one of many factors insurance companies consider when setting rates. Driving less these days can lower your insurance premiums. However, how much mileage is reflected in your premium depends on the insurance company.

Number 3: If you also own a home, get home insurance and car insurance together.

According to the Insurance Information Institute, “many insurance companies offer breaks if you sign up for more than one type of insurance.” Drivers can save money by insuring more than one car with the same insurer, with some receiving lower rates as long-term customers (but again, they’ll have to shop around often).

Number 4: Ask for a higher deductible.
You’re rolling the dice here because your insurance doesn’t kick in until you meet your deductible. However, if you can afford to pay a higher deductible in the event of an accident, it can help lower your premiums significantly. According to the Insurance Information Institute, which offers several other suggestions here.

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