Here’s the short version on why auto rates are going crazy. 

 

• Inflation from 2020-2024 

  • https://www.usinflationcalculator.com/inflation/current-inflation-rates

  • https://smartasset.com/investing/inflation-calculator 

 

• Car prices are up (meaning repairing & replacing are up) - https://www.marketwatch.com/story/the-cost-of-car-insurance-keeps-going-up-and-its-likely-to-get-worse-heres-why-11666884113 

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• Cost of fixing vehicles is up - There is increasing technical training/experience needed to do repairs on more advanced technology in cars (sensors, cameras, adaptive cruise control, sterling assist, etc) and parts are more expensive because vehicles are more sophisticated and complex. https://www.marketwatch.com/story/the-cost-of-car-insurance-keeps-going-up-and-its-likely-to-get-worse-heres-why-11666884113 

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• Cost of replacing totaled vehicles is up a TON - 44% higher than 5 years ago according to 2023 Edmonds used vehicle report. With more cars being totaled out, there are LESS cars available. Less cars, mean used car prices rise... meaning total loss payouts rise as well.  https://www.nerdwallet.com/article/insurance/why-are-car-insurance-rates-going-up 

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• Cost of rental car up significantly because car repairs are taking 40% longer than in the past. Major contributing factors are the parts shortage, labor shortage, and increase in technology in vehicles. A bumper or windshield is no longer a plug and play type fix. https://www.marketwatch.com/story/the-cost-of-car-insurance-keeps-going-up-and-its-likely-to-get-worse-heres-why-11666884113  

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• The sheer number of accidents are up. Q2 of 2022 was fourth consecutive quarter of increase accidents, https://www.kbb.com/car-advice/insurance/vehicle-insurance-premium-rising/. 

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• EVEN cars with anti-lock brakes, automatic braking, etc, the number of accidents are up. Tesla has the highest accident rate of ANY brand. https://www.lendingtree.com/insurance/brand-incidents-study/ 

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Social inflation - More than ever, people are suing immediately even for minor incidents. People have been conditioned that they, “may be owed compensation” for an accident. As the economy overall becomes more difficult, the number of people who previously would not have sued purely for a “payday" goes up. 

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https://www.travelers.com/resources/business-topics/insuring/4-factors-causing-social-inflation 

https://www.iii.org/article/social-inflation-hard-to-measure-important-to-understand

https://content.naic.org/cipr-topics/social-inflation#:~:text=Issue%3A%20Social%20inflation%20is%20a,monetary%20relief%20for%20their%20injuries. 

 

OK, rates are up. How do we manage the increases?

 

• Make sure your liability limits are appropriate to protect your assets and income.  

• Make sure you have as high a deductible as you can handle. 

• Remove extras you may not want. Do you want OEM parts coverage or increased payout on damage to your car? Do you need rental car or can you go without it? Do you have the right amount? Remove those bells and whistles if you have them and dont want them. 

• Work towards improving your credit. Fom a cold and purely statistical standpoint, people who have poor credit scores file more claims and have more severe claims. Why? There’s all kinds of speculation, but regardless of the cause, there is a strong correlation between more frequent/ more severe claims, and poor credit. It doesn't mean that if you have poor credit you aren't a good insurance risk or good insurance customer or good person. It just means that most people with that same factor, have more frequent and more costly claims. Work to clean up and improve your credit where you can. 

• Pay your 6 month policy in full or on automatic EFT payment. Many companies give a pretty substantial discount for paying in full at your renewal. Often 8-12%. Some also give a discount for paying on automatic payment which also avoids any credit card processing fees. 

• Participate in their telematics discount when available. Things like Nationwide’s SmartRide program, or Safeco’s RightTrack program. https://www.nationwide.com/personal/insurance/auto/discounts/smartride/ 

• https://www.safeco.com/products/righttrack 

• Talk to your independent insurance agent. They can look at your policy and go through all these kind of options and items with you. A short conversation will help ensure what you have matches what you really need.