If you’re wondering why your car insurance went up, you aren’t alone. One of the most common reasons is simply because your insurer increased its rates.
Whether to account for inflation, recoup funds after a natural disaster or cover higher claims, many insurance companies increased rates in 2022. Here are a few examples, according to S&P Global Market Intelligence (this is not an exhaustive list):
It’s clear car insurance rates rose in 2022. But why exactly did the cost of your car insurance policy go up? Let’s examine six reasons for the rate hikes.
1. Increased Inflation From 2021 Into 2022
Since early 2021, the country has seen an increase in inflation for a variety of reasons. The COVID-19 pandemic caused shortages in manufacturing and hampered shipping lines, the fiscal response to the pandemic increased the money supply in the market and the 2022 Russian invasion of Ukraine increased the prices of oil and commodities. As inflation continued throughout 2022, car insurance was just one thing that became more expensive.
According to the Bureau of Labor Statistics, the consumer price index rose by 7.7% between October 2021 and October 2022. The BLS also reports that auto insurance premiums rose by an average of 12.9% in that time period. So if your car insurance rate increased by about 10%, you’re in the same boat as many other drivers.
Similarly, the bureau reports that the average cost of labor increased by 5% from September 2021 to September 2022, which means car insurance companies may be spending more on their staff.
2. Increased Repair Costs
The cost of vehicle repairs has also increased over the past year. Since an auto insurance policy pays for repairs after an accident, this is another reason insurers have been raising their rates.
Nathan Weller, insurance staff writer for Fit Small Business and a licensed claims adjuster in 13 states, says, “The insurance industry as a whole is raising rates. There are several factors, but all of them come down to the high loss ratio companies are experiencing.
“Since the end of the lockdown, supply chain issues and backed-up shops have caused the costs of all claims, including minor claims, to skyrocket,” he adds.
According to the BLS, motor vehicle maintenance and repair costs rose by an average of 10.3% from October 2021 to October 2022. More specifically, the price of bodywork rose by 13.1% on average and repair costs rose by 13.2%.
A repair that used to cost $100 would now cost $113 on average compared to 2021. But if there’s a shortage of a particular component, the repair could be even more expensive relative to 2021. Add to that the increase in labor costs, and car insurance companies are having to fork over a lot more money for repairs. Those costs factor into average rates, and insurers pass the increases on to policyholders.
3. Supply Chain Slowdowns
The COVID-19 pandemic shut down factories and trade routes all around the globe in 2020. Automotive manufacturing is still on the road to recovery, and some parts remain hard to find and source. In particular, a microchip shortage caused manufacturers to cut about 4.26 million vehicles from production in 2022, according to Automotive News.
Supply chain issues have also affected repair shops across the country. Some parts that were easy to get before the pandemic are harder to find now. A mechanic may have to order a part from overseas and wait weeks to complete a repair that would have taken a few days before. If your car spends more time in the shop, you’ll need a rental car for longer as well.
4. Increased Health Care Costs
Health care costs have also been on the rise in recent months. According to the BLS, medical costs rose by an average of 5.4% from October 2021 to October 2022. However, what the average person pays for health insurance rose by a whopping 20.6%.
Medical payments coverage (MedPay) and personal injury protection (also called PIP insurance) cover medical bills for you and your passengers when you get into an accident. Since car insurance companies need to pay more for medical services, they increase rates to compensate.
5. Environmental Events in Your State
When one region of the country has an increase in severe weather or natural disasters, the number of vehicle damage claims increases in the area. Car insurance companies can raise rates in the state to compensate. Even people who didn’t file claims may pay higher rates in the area after the environmental event.
Say a car insurance company expects a certain number of cars to have flood damage in a state in a year. Now, if a serious storm causes 10 times that amount of flood damage, the money to pay all those claims will reduce the company’s reserves. When the company reassesses its rates, it could raise prices to recover funds.
6. Increased Insurance Claims
Toward the start of the COVID-19 pandemic, many people were staying at home and avoiding contact with others. That meant fewer cars were on the road. Fast-forward to 2022 and people have returned to pre-COVID levels of driving. Along with the increase in driving came an increase in accident claims.
Weller gives an example of how labor and supply-chain issues could make even a minor repair more expensive for insurance companies now. In this scenario, the at-fault driver’s insurance company pays for the claimant’s headlight to be repaired.
“Even though the car is drivable, legally they can’t drive it,” he says. “But, there are no body shops that can see the car for three months, and the headlights are on backorder for four months.
“There is also a shortage of rental cars because rental companies sold off significant parts of their fleet during COVID to generate revenue. Now a minor claim is going to cost thousands and very well could exhaust limits just with transportation expenses for months as the claimant waits on the shop to fix a headlight.”
According to S&P Global, many U.S. insurers saw double-digit percentage increases in their loss ratios for private passenger car insurance in the first quarter of 2022 compared to the prior year. The auto loss ratio shows how much an insurer spends on claims per dollar collected from premiums. So for example, Allstate was spending 20.4% more on claims compared to premiums than it was the year prior.
The combined ratio compares total losses and expenses to premiums. A ratio under 100 means the company is spending less on claims than it makes in premiums, while a ratio over 100 means the opposite. Allstate’s combined ratio was 102.1% in the first quarter of 2022, so it was paying more for claims than it received in premiums.
Up until now, we’ve discussed factors that affect car insurance rates en masse. But there are also a variety of factors that can affect your rate. If you’re wondering why your car insurance went up, consider these as parts of the equation.
Location
Car insurance rates vary by ZIP code and even by neighborhood. If everything else about your situation stays the same, you could see a rate increase if you move to a new location.
Age
In general, your car insurance rates should decrease as you age. However, senior drivers do pay slightly higher rates than middle-aged drivers. People will see their rates increase as they age beyond 65.
Driving Record
If you have an at-fault accident or get a speeding ticket, your rates will increase as you become riskier to insure. You should be expecting a rate increase in this case. However, it’s possible for an increase to come as a surprise. This may happen if you forgot to mention a moving violation in your driving history when you were signing up for insurance and the company found out about it later.
Will Car Insurance Rates Go Down?
Car insurance rates may slow their ascent in 2023 if inflation slows down and the auto parts supply chain fully recovers. Car insurance companies also cut their rates from time to time. For example, Amica cut its rates in March 2022.
How To Find Cheaper Car Insurance
If you noticed your car insurance went up, it might be time to do some comparison shopping. There’s no penalty for switching car insurance companies, and most companies give prorated refunds if you cancel mid-term. Consider the following to find cheap car insurance:
- Compare companies: You can find very different prices from different providers. One company may offer an annual rate that’s hundreds less than another company’s rate, so compare at least three when you shop.
- Bundle policies: If you have homeowners or renters insurance, bundle your auto coverage with one of these to save money.
- Shop for the best discounts: Finding the right car insurance discounts can make your coverage more affordable. For instance, some companies offer better discounts for students and others offer better discounts for military members.
- Try usage-based insurance: If you’re one of the many people who started working from home during the pandemic, you could save money with usage-based programs. Programs like Progressive’s Snapshot® reward low-mileage drivers. Or you could get a pay-per-mile policy like Allstate Milewise® or Metromile.
- Raise your deductible: Increasing your deductible will lower your car insurance premium. But be sure you can pay it if you get into a car accident.
Why Did My Car Insurance Go Up?: The Bottom Line
There are several reasons your car insurance may have gone up in 2022. Many companies raised insurance pricing to keep up with the cost of claims or inflation, but other things may have affected your rate as well. The bottom line is that you can compare car insurance quotes and change providers if you think your coverage is too expensive.
Top Auto Insurance Recommendations
Having compared the best car insurance providers in a variety of categories, we recommend State Farm and USAA as our top two picks.
State Farm: Best Customer Experience
State Farm offers a wide variety of insurance discounts, including one of up to 25% for good students. Our rate data shows the company tends to offer cheap car insurance as well. Full coverage for a 35-year-old from State Farm costs an average of $1,657 per year, which is about 21% cheaper than the national average.
Keep reading: State Farm insurance review
USAA: Best for Military Members
According to our data, average full-coverage rates from USAA are about 33% cheaper than the national average cost. This makes USAA a great option for budget-minded drivers. However, it’s only available to military members and veterans along with their children and spouses.
Keep reading: USAA insurance review
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Why Did My Car Insurance Go Up: FAQ
Your car insurance rate will increase if you get a ticket for a traffic violation or cause an accident, but there are other possible reasons as well. In 2023, many car insurance companies raised their rates to keep up with inflation or to account for higher claims than the prior year.
Your car insurance can increase if the cost of repairs, labor or health care services increases. This is because car insurance companies raise rates to account for higher costs in these areas. Also, a major environmental event that damages many cars in your area can increase rates for drivers in the state.
Unfortunately, it’s normal for car insurance rates to increase most years. However, companies do cut insurance rates from time to time. Some companies offer loyalty discounts, so you may see your rate decline after a number of years with the same provider.
Our Methodology
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.
Here are the factors our ratings take into account:
- Cost: Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into consideration.
- Coverage: Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
- Reputation and experience: Our research team considered market share, ratings from industry experts and years in business when giving this score.
- Availability: Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
- Customer experience: This score is based on volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness and helpfulness of each insurance company’s customer service team based on our own shopper analysis.
Our credentials:
- 800 hours researched
- 45 companies reviewed
- 8,500+ consumers surveyed
*Data accurate at time of publication.
