States Are Pushing Back On Car Insurance Rate Hikes

Estimated read time 4 min read

But what does this mean for the future of car ownership?

Car insurance is an unusual service since it’s required by law if you want to drive on public roads. Considering the risk of causing an accident, doing harm to someone else’s vehicle and maybe even them or their passengers, it’s easy to see why insurance is a good idea. But a growing number of people are feeling the rub and questioning what they’re getting out of the service as insurers keep ratcheting up rates.

A man crashed his Camaro into a house, then tried to act casual when police showed up.

Chances are you’ve seen your car insurance payments increase in the past two years. Depending on where you live, that increase might be quite dramatic. The Wall Street Journal highlighted in a recent report how some state regulators are pushing back on the pressure from insurance companies to allow for big rate increases, although the sad reality is things are most definitely inching upwards.

For example, the report highlights how Geico asked to increase rates by 11.1% in New York state, but regulators only allowed a 6.8% increase. State Farm wanted a 12.5% increase but only got 10.6%. While consumers aren’t loving the increases, they could be far worse.

In Georgia, Allstate customers have endured a 40% hike. That’s an extreme example, but some individuals are left reeling after seeing their monthly payments skyrocket, depending on where they live, their driving record, and the vehicle(s) they’re insuring.

There’s plenty of debate about why car insurance rates are climbing so steeply. Insurers are scrambling to address a financial crisis, with The Wall Street Journal pointing out that State Farm, which is currently the biggest insurer in the nation, has lost $0.28 for ever $1 written so far in 2023. That’s triggered a $13,000,000,000 underwriting loss for the company’s car insurance operations.

But what’s driving this situation? That’s where many opinions and theories come into play. The report focuses on four factors: repair cost increases, medical expenses rising, more accidents on roads, and more lawsuits associated with crashes.

If you’ve tried to buy parts for your vehicle since about midway through 2020, you’ve likely realized they’re noticeably more expensive than in the past. The same components, made of the same materials, have been subjected to the same inflationary pressures as your groceries and just about everything else. While production shortages were blamed a couple of years ago, those costs aren’t coming down for the most part.

It’s even worse if you have a newer vehicle loaded with cutting-edge tech. It used to be if you cracked a taillight lens the replacement was fairly cheap, maybe $100 or less. Now, a cracked lens means replacing the whole taillight assembly which might include a radar sensor, camera, and other cutting-edge tech, pushing costs in many cases well north of $1,000. All those cool bells and whistles on your car not only made buying it more expensive, it’s driven up repair and replacement costs.

Now that the pandemic is over and people are back on public roads in force, crashes, including fatalities, are up. We’ve been watching the trend in accidents and deaths for years now, a curious phenomenon considering there are more and more cars loaded with all the latest safety technologies which were supposed to prevent that very situation. We feel there are two good theories about what’s happening.

 One is that people trust too much in their driver assistance features, paying less attention to their surroundings as they play with features on the touchscreen or even text while behind the wheel. What they fail to understand is those sensors are supposed to enhance their observation of road surroundings, not replace them.

It’s also possible that with their car constantly squawking at them, drivers are either turning off safety features or just ignoring their warnings, rendering them essentially useless. There are other good theories about the rise in car accidents, but the ultimate result is more insurance claims and increased rates.

What The Wall Street Journal doesn’t mention is the dramatic increase in car theft rates. Those are putting a strain with more total loss claims and people having to either buy parts for a recovered but damaged vehicle or a whole new car.

While state regulators can try holding back the surge in auto insurance rates, something has to be done to address the root problems or the runaway freight train will keep gaining momentum.

Images via Volvo Cars, Mercedes-Benz, Lexus, Nissan

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