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Premiums are up more than inflation, as insurers deal with rising repair bills and higher car rental rates. But consumers do have some options, experts say.
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By Ann Carrns
If you’ve recently gotten a more expensive car insurance bill, you’re not alone.
Auto insurance costs were up about 15 percent in March from a year earlier, significantly higher than the latest reading on overall inflation of 5 percent. The average annual premium is about $2,000, according to the personal finance website Bankrate.
And car insurance prices are expected to continue rising. This week, the chief executive of the insurer Progressive said in a shareholder letter that the company planned to be “aggressive with raising rates over the remainder of the year.” Allstate said it expected to pursue additional increases in 2023 “to improve auto insurance profitability.”
Higher costs for repairs, including for both auto parts and labor, along with higher costs for car rentals as a dearth of workers leads to longer repair times, all contribute to costlier claims and higher premiums, industry analysts say. “Everything associated with repairing is going up,” said Stephen Crewdson, a senior director of insurance business intelligence at consumer research company J.D. Power.
As the pandemic has ebbed, more drivers have returned to the roads, whether for work or leisure travel, increasing the risk of accidents, said Robert Passmore, department vice president of personal lines with the American Property Casualty Insurance Association, an industry group. Bad habits acquired during the pandemic, like driving at faster speeds, have lingered, he added.
Doug Heller, director of insurance with the Consumer Federation of America, said many good drivers are being penalized with rates based on factors that have little to do with their driving. In most states, you may pay higher premiums if you have poor to fair credit, even if you have a pristine driving record. Insurers use a variation of consumer credit scores — similar to the ones lenders use to determine the risk of a borrower repaying debt — as one of several factors to assess a driver’s likelihood of filing an insurance claim.
A recent report by the Consumer Federation of America about insurance premiums in New York found that drivers with perfect driving records and excellent credit pay an average of $730 a year for basic insurance, while drivers with the same driving record but poor credit average almost $2,100. The federation supports eliminating the use of credit scoring in insurance rating, saying it especially harms lower-income customers and people who live in minority neighborhoods. (At least three states — California, Hawaii and Massachusetts — bar the use of credit scoring in setting these premiums, and a few others limit its use.)
Insurers defend giving better rates to drivers with good credit, saying it makes sense because those customers are less likely to file insurance claims. “The vast majority of customers get a better rate because we’re using credit scoring,” Mr. Passmore said.
Car insurance is hard to avoid because basic coverage is mandatory in most states. So what can you do to lower your bill? Chuck Bell, programs director of advocacy at Consumer Reports, recommends seeking out three or four quotes from different insurers to see if they can offer lower rates. Many consumers remain with the same insurer for decades, he said, but it’s smart to check prices from time to time. “We think you should shop annually,” he said.
While many people “would rather get a root canal,” he said, getting auto insurance quotes isn’t difficult. He suggests calling insurers on the phone, but you can also get quotes directly on insurer websites. (Sites that aggregate information can give you a general idea, he said. But for specific quotes, it’s best to deal directly with insurers or independent agents that represent multiple carriers.) Have your current policy handy so you can easily compare coverage.
The higher premiums are, in fact, pushing drivers to shop around for lower rates, according to recent findings from J.D. Power. “They’re actively looking for a better deal,” Mr. Crewdson said.
The share of households shopping for auto insurance in the prior month averaged 13 percent in March, the highest since mid-2021, according to J.D. Power, which based its findings on daily online surveys of up to 1,000 consumers. The average switch rate — households who changed insurers in the prior month — ticked above 4 percent in March, compared with an average of 3.6 percent for all of 2022 and 3.4 percent for 2021.
If you’re looking to buy a car, you can help keep insurance costs down from the start when car shopping, by focusing on models that are less costly to insure, Mr. Bell said. Rather than a large pickup truck or S.U.V., consider crossover vehicles, he said, which tend to be less expensive to insure.
If your car is an older model with a lower value, you could cut your premium by reducing collision coverage, which pays to fix or replace your car when it’s damaged in a crash with another car or an object like a fence, and comprehensive coverage, which covers the theft of your car and damage from things like branches falling on it.
Insurers also offer usage-based insurance, which involves having a device in your car that monitors your mileage and driving habits. The insurer then factors the data into your premium. If you are a safe driver and comfortable sharing data with your insurer, or if you are driving less, you could benefit. “It’s a way to save money, for some people,” Mr. Bell said.
Here are some questions and answers about how to lower your car insurance premiums:
Would improving my credit score help?
Raising your credit score may help lower your premium. Paying your bills on time and avoiding maxing out your credit cards — keeping what credit bureaus call “utilization” low — can help increase your score. You should also limit the number of new credit card accounts you open and loans that you take out. You can check your credit report for accuracy free by visiting www.annualcreditreport.com.
Some insurers don’t use credit scoring in setting premiums — CURE Auto Insurance, for instance, says it does not — so it’s worth asking about when you are shopping for coverage.
Can raising my deductible lower my premium?
Yes. Choosing a higher deductible — the portion of the bill for a claim that you are responsible for, before the insurance policy pays — can lower your premium. Going from a deductible of $500 to $1,000 can save an average of about 10 percent on your premium, Mr. Bell said. If you can, put away the savings on your premium to help pay the deductible, should you have to file a claim.
Where can I find information about insurers in my state?
State insurance departments may have information to help you compare rates as well as service levels at different insurers. Texas, for instance, has a detailed tool for getting quotes, and Massachusetts offers a spreadsheet to help with comparisons. The National Association of Insurance Commissioners offers a map of state insurance departments, and maintains a complaint index that consumers can use to see if their insurance company is above or below average.
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How to Deal With Rising Auto Insurance Rates? ›
Auto accidents and traffic violations are common explanations for an insurance rate increasing, but there are other reasons why car insurance premiums go up including an address change, new vehicle, and claims in your zip code.How can I get a lower rate on my car insurance? ›
- Increase your deductible.
- Check for discounts you qualify for.
- Compare auto insurance quotes.
- Maintain a good driving record.
- Participate in a safe driving program.
- Take a defensive driving course.
- Explore payment options.
- Improve your credit score.
Auto accidents and traffic violations are common explanations for an insurance rate increasing, but there are other reasons why car insurance premiums go up including an address change, new vehicle, and claims in your zip code.Does credit score affect insurance rate? ›
A higher credit score decreases your car insurance rate, often significantly, with almost every insurance company and in most states. Getting a quote, however, does not affect your credit.Why did my car insurance go up to 300 dollars? ›
An imperfect driving record, a history of claims, and poor credit will lead to increased car insurance rates.Can you ask your insurance company to lower your rate? ›
Auto insurance prices are non-negotiable, so you can't ask your car insurance company to lower your rates. However, there are several ways to find more affordable premiums. Compare quotes from multiple insurers. Although states regulate the cost of car insurance, different companies offer varying rates.What are 3 factors that lower your cost for car insurance? ›
Some factors that may affect your auto insurance premiums are your car, your driving habits, demographic factors and the coverages, limits and deductibles you choose. These factors may include things such as your age, anti-theft features in your car and your driving record.Why did my auto insurance go up in 2023? ›
A recent analysis by the Insurance Information Institute (Triple-I) showed that U.S. auto and homeowners insurance premiums lagged behind the inflation rate in 2020 and 2021, laying the groundwork for the premium increases which occurred last year and will continue into 2023.Is it normal for car insurance to increase every year? ›
Annual increases are typical across the industry, but the way your risk factors are viewed by a particular company may vary. Get to understand your coverage and discounts to ensure you are getting the best price for the assurance you need.Why does Allstate keep raising rates? ›
In 2021 and 2022, the company incurred catastrophe losses of $3,339 million and $3,112 million, respectively. It remains focused on reducing losses through its catastrophe management strategy and reinsurance programs, and limiting exposure to riskier geographic markets by raising premiums.
What is a good credit score for auto insurance? ›
What, then, is a good credit score to get a car insurance policy with competitive prices? A score in the “good” range — between 670 and 739, according to the FICO scoring model — is generally considered to be the baseline for competitive pricing.What is a good insurance score? ›
The higher your insurance score, the better an insurer will rate your level of risk in states where insurance scores are a rating factor. According to Progressive, insurance scores range from 200 to 997, with everything below 500 considered a poor score, and everything from 776 to 997 considered a good score.What is a good credit score? ›
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.Why are Geico rates so high? ›
Geico's rates increase when drivers add more coverage, get into an accident, receive a speeding ticket, or file a claim. Certain life events, like adding a teenage driver to your policy, can also increase your rates. Plus, it's possible to lose discounts, which could increase your premium.Does owning an expensive car always mean that your insurance premiums will be higher? ›
The more coverage you're required to buy in your state and the more valuable your vehicle is, the more you'll pay for car insurance. Teen drivers also tend to pay more in premiums than older, more experienced drivers.Did my car insurance go up because of inflation? ›
Inflation drives higher insurance costs
Inflation is a primary culprit in escalating prices or premiums for auto coverage as costs rise for mechanics, other types of labor, repair parts and more. "Really, the numbers come down to inflation," Deventer said.
Surprisingly Great Rates | State Farm®Can you bargain with insurance companies? ›
If the insurance company responds to your demand letter with a reasonable offer, you can counter with an amount that is lower than what you demanded. By doing so, you can show the adjuster your willingness to compromise.What is the best way to politely reject an insurance offer? ›
- A clear statement that you reject the settlement offer that you received;
- A list of specific reasons why that explain why the offer is too low; and.
- A demand for a better offer.
Teen and senior drivers typically pay the highest car insurance prices, while drivers in their 30s and 40s often pay the lowest rates. We built the table below using data supplied to us from Quadrant Information Services. Each profile combines data for both male and female drivers of each age group.
Should car insurance decrease every year? ›
Car Insurance Can Go Down If You're a Good Driver
Most driving infractions and at-fault accidents will fall off your insurance record after three years. If you've been a good driver for the last few years, you may notice your rate decreasing.
Removing someone from your car insurance policy may reduce your overall rate, but it depends on several factors related to that individual driver. If the driver has a history of insurance claims and accidents removing them from your policy may reduce your rate.Will auto prices go down in 2023? ›
There is good news on the horizon in 2023, however. J.P. Morgan estimates that prices for both new and used vehicles are set to decrease as supply chain issues abate and inflation is poised to keep easing.Why did my car insurance go up when nothing changed? ›
Insurance companies calculate premiums based on insurance risk. That means insurance rates do not increase suddenly without reason. A policy price increase can be due to factors you can or cannot control. For instance, you may have committed a traffic violation, or maybe you were involved in an auto accident.Will insurance rates go down in 2023? ›
Car insurance costs are expected to continue rising through 2023.Is it better to pay car insurance monthly or every 6 months? ›
In general, paying your car insurance premium annually rather than monthly is the cheapest option. Providers incur processing costs if you pay your premium in installments, and those costs get folded into your monthly payment. Most insurers offer a discount if you pay in full because it keeps their costs down.Does credit score affect car payment? ›
Lenders look at your credit score when they review your application for a car loan, alongside other financial factors, such as your income. Your credit score is an important factor in determining your ability to repay debt.Do car insurance companies do hard credit checks? ›
A car insurance credit check will always be a soft inquiry and not a hard inquiry. A soft inquiry won't be visible to any lenders and it will have no effect on your credit score, so you can shop around for multiple car insurance quotes without worrying about affecting your credit score.