Money Management

Auto insurance rates are expected to rise due to factors like higher repair costs and bodily injury claims. Learn how to keep your premiums affordable. 

Car insurance premiums spiked by 19% in 2023, the biggest jump on record since 1976. With overall inflation leveling off, you may be wondering: Will auto insurance become more affordable in 2024?

At this point, unfortunately, the answer appears to be no. Industry predictions suggest that premiums will continue to rise in 2024. But the news isn’t all bad: There’s still plenty you can do to keep auto insurance costs affordable. Let’s take a look at why car insurance premiums keep rising and what you can do about it.

Why is car insurance so expensive?

You may look at soaring premiums and assume that insurers are basking in record profits. That’s not the case, though.

The Insurance Information Institute projects that auto insurance companies will end 2023 with a net combined ratio of 109.5. That means insurers will have paid out $1.095 in claims for every $1 of premiums they’ve collected. Like any other business, insurers want to make money. So it’s likely that they’ll raise rates until they’re profitable, though insurers generally have to get permission from states to increase premiums.

There are a few reasons auto insurers are experiencing high costs — and ultimately passing them on to you, the customer:

Drivers are getting in more accidents: U.S. drivers are driving less than they were before the pandemic due to higher gas prices and an uptick in people working from home, but the frequency and severity of accidents is increasing. One factor is that people are engaging in more risky behaviors, like speeding, distracted driving, and driving under the influence of alcohol and cannabis.Repair costs are climbing: Motor vehicle parts and equipment costs have spiked by 23.9% since September 2019, according to the American Property Casualty Insurance Association, which is faster than overall inflation. Because cars have gotten more complex and require increased specialization to repair, labor costs have also soared.Bodily injury claims get more expensive each year. Between 2018 and 2022, bodily injury claim severity — the amount insurers pay to settle bodily injury claims have spiked by 40%. You can blame the rising cost of medical care, an increase in fatal crashes, and the fact that juries are awarding larger verdicts than ever in such cases. In fact, the median lawsuit value increases by nearly 25% annually.Extreme weather is becoming more common: The rising number of severe weather events, like hurricanes, tornadoes, and floods, is driving auto insurance rates higher in many states. One reason is that most auto insurers have reinsurance, which is basically insurance for insurance companies. Some reinsurance companies are pulling out of high-risk states, allowing those that remain to up their rates.

Tips for keeping your premiums affordable

There are a lot of factors you can’t control that affect your auto insurance, like the weather and the behavior of other drivers. But here are some things you can do to keep your premiums manageable:

Shop around for a policy: It’s usually a good idea to obtain quotes at least once a year to make sure you’re getting a competitive rate. If you’re not sure where to start, these auto insurance companies had the best rates in 2023.Drop unnecessary coverage: If your car isn’t financed and is only worth a few thousand dollars, you may be able to get rid of comprehensive car insurance and collision coverage.Consider increasing your deductible: Raising your deductible can often save you money on premiums, but make sure you have enough saved to cover the higher out-of-pocket cost if you need to file a claim.Show that you’re a safe driver: Moving violations will usually increase your premiums, but you can often get a safe driver discount if you haven’t had a ticket in several years. Some insurers offer telematics devices, which track driving behaviors like your mileage, speed, and whether you hit your brakes frequently. If you install the device and demonstrate low-risk behaviors, you could score a discount.Bundle your coverage: If you have homeowners insurance or renters insurance, you could get a discount for bundling your policies.

No one likes to spend money on insurance. It’s one of the few things we buy with the goal of never having to use it. Since premiums will likely continue rising in the short term, it’s best to look for savings opportunities where you can, but also prepare for higher premiums when you make your budget.

Our best car insurance companies for 2022

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

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