Car Insurance Rates Increase 17.8%–Why Is This Happening?

Car Insurance Rates Increase 17.8%–Why Is This Happening?

Car Insurance Rates Increase 17.8%–Why Is This Happening?Car Insurance Rates Increase 17.8%–Why Is This Happening?By ALLEN MCQUISTON
Jemez Insurance Agency
Serving Los Alamos since 1963

I came across this article in Forbes magazine and thought I’d pass it along. The article was originally published in August 2023 and was updated in December.

Car insurance rates have risen by double digits, and drivers may not see relief anytime soon. According to the latest release of the government’s consumer price index, the cost of motor insurance rose 17.8% from July 2022 to July 2023.

Drivers currently pay an average of $1,668 for their car insurance policy, according to online insurance agency Insurify. New Mexico, Nevada, and New Jersey are seeing the highest annual increases in 2024, with prices increasing by 38%, 36%, and 34%, respectively.

Experts point to four main reasons for the increase in car insurance rates:

  • The costs associated with driving are higher.
  • More cars are on the road – which means more accidents.
  • Vehicle theft has increased.
  • As catastrophic weather events multiply, there is an increase in the number of damaged and totaled cars.

Inflation increases the costs associated with cars

In general, driving a car today is more expensive than it was a few years ago. Inflation – which rose in July 2023 to an annual rate of 3.2%, from 3% in June – has increased the cost of owning a car, including higher repair costs and medical treatments due to accidents by car. Insurance companies are passing these higher prices on to their customers.

The cost of vehicle maintenance and repair has increased by 12.7% year over year, according to the consumer price index report.

“The cost of repair is much higher than ever because of the many technological and safety advances that have been made,” said San Antonio personal injury attorney George Salinas. “Even something as simple as a bumper can have a combination of sensors or other parts that get expensive very quickly.”

More drivers on the road means more accidents

As driving increases, so does the likelihood of car accidents – and the likelihood that insurance companies will have to pay for more premiums.

The National Safety Council reports that the number of kilometers driven in May 2023 increased by 2.5% compared to May 2022. Annual mileage is 30% higher than in 2020, when the country was mostly on lockdown due to Covid.

Last year, drivers hit and killed more than 7,500 pedestrians, the most since 1981.

“The frequency and severity of accidents have increased recently, leading to higher payouts from insurance companies,” said Maria Coello, an insurance agent with MyClick Insurance. “This trend has forced insurers to adjust their premium rates to maintain their financial stability and ability to meet claims.”

Double-digit increase in car theft

Car thieves are out in large numbers. Motor vehicle thefts jumped by an impressive 34% during the first half of 2023 compared to the same time period last year, according to mid-year 2023 statistics released by the Criminal Justice Council.

Salinas said replacing these cars has become more expensive. Referring to the car shortage during Covid, he notes, “The bubble that hit the new and used car market…means higher economic losses when those vehicles are totaled.”

Cars hit by more floods, fires and other natural disasters

Over the past few years, catastrophic weather events have caused more damage to cars, which means a huge increase in costs for insurance companies as they pay out more claims. “Although there is some planning for natural disasters in the economic forecasts, the number of them has exceeded what the insurance companies or anyone else has predicted,” says Salinas.

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