Americans Aren’t Happy About Car Insurance Rate Hikes

Estimated read time 3 min read

Drivers are feeling squeezed to the point of breaking.

If you haven’t seen your car insurance rates increase in the past year, you’re one of the lucky ones. Most people have experienced at least a modest hike in their premiums, with many getting a big shock when their insurance carrier announced their rates are skyrocketing. With inflation making everyday necessities more expensive, many Americans feel the car insurance situation is pushing them over the financial edge.

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That would explain why J.D. Power found a 12 point drop in car insurance customer satisfaction in its annual study. That’s the largest decline the firm has recorded in 20 years. J.D. Power claims that dissatisfaction has led some drivers to sign up for usage-based insurance policies where telematics monitor driver behavior to calculate rates.

Not everyone is signing on for what some consider an invasion of privacy. Considering how unhappy consumers are with insurance companies lately, it’s not hard to imagine why there would be a loss of trust.

The big question so many ask is why car insurance rates have been increasing so much lately? The fact is there are many factors feeding into the current situation, even though some only want to focus on one or two.

One big factor is inflation. If you get in an accident, everything associated with the process is more expensive: car parts, hospital stays, rental car rates, etc. The insurance company must take that into account when calculating rates, so when everything else costs more, your insurance premium must increase as well.

Related to that is the lingering high cost of used cars and vehicle parts. Both are projected to continue decreasing through early next year, but that doesn’t necessarily spell relief right now. With your vehicle technically worth more money, plus the cost of fixing it higher, your insurance costs must account for that.

Crash rates have continued their increase after a lull during the pandemic, including road fatalities. There are many theories about what’s driving this, including more driver distraction, overreliance on driver aids, and increasingly crowded urban roads. When there are more crashes, especially ones involving deaths, insurance companies have to pay out more money.

New cars have more expensive parts, thanks in part to advanced safety sensors embedded in bumper covers, taillights, etc. When those components are damaged the cost of replacement can be multiple times higher than comparable parts on older vehicles.

Car theft and vandalism rates are also up. Everyone has opinions about why this might be, but if you live in an area where more vehicles are being stolen or damaged as they sit, expect the insurance company to increase your rates.

Most consumers don’t realize insurance companies aren’t exactly flush with cash these days. For example, State Farm reported an underwriting loss of $13.2 billion for 2022. Allstate recorded a $974 million underwriting loss for auto insurance last year. The list goes on. That’s why many insurance companies are pushing to increase rates, with some states pushing back. But that doesn’t mean rates in those states aren’t increasing.

If your car insurance rates haven’t increased in the past year or so, you’re fortunate. However, the likelihood is that you will see some type of increase as insurance companies scramble to deal with increasing costs.

Images via Mercedes-Benz, GM, Volvo, Ford

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