The average annual cost of a car insurance policy surged $240 to $1,668 in the first six months of 2023, up from $1,428 in 2022. Prices will increase another 4% before the end of the year, according to Insurify’s latest auto insurance report. The report attributes these increases to insurers experiencing high losses as a result of soaring auto repair prices and the effects of climate change.
“Vehicle repair and maintenance costs have outpaced inflation and show no signs of slowing, leading insurers to increase auto insurance prices to keep up with the cost of higher claim payouts,” said Allie Feakins, Insurify’s senior vice president of insurance.
The report examines auto insurance price trends using Insurify’s own data of more than 79 million car insurance quotes, sourced directly from partnering insurance companies. It also reveals:
- Drivers are dropping coverage to keep car insurance costs affordable. The percentage of car insurance shoppers considering buying full-coverage car insurance fell more than 50% in 2023, compared to 2022.
- Michigan still has the highest auto insurance costs in the country, with an average policy costing $231 a month. Michigan drivers spend about 4.4% of their household income on car insurance---the highest proportion of any state.
- Car insurance prices have climbed the highest in New Mexico, Nevada and New Jersey, with an average 34% increase in costs within the last six months
- Major insurers are pulling out of Florida and California, citing devastating hurricanes and wildfires that have led to heightened catastrophe risk and a high number of expensive claims.
In addition to impacting home insurance rates, climate change is now beginning to be a greater concern for auto insurers. As a result, drivers in California and Florida will see fewer options for car insurance as insurers begin pulling out of the state.
“The frequency and severity of natural disasters have led to some geographical areas experiencing different types of weather events from what they’ve seen before,” said Betsy Stella, Insurify’s vice president of carrier management and operations. “More vehicles are being caught and destroyed in fires and floods, and ice is sticking around longer, increasing the likelihood of collisions. This has led to auto insurers paying a higher number of---and a higher price for---customer claims.”
Claims are also more difficult and expensive to fulfill, as the price of auto parts continues to surge, with the consumer price index for motor vehicle maintenance and repair showing double-digit increases every month since September 2022.
Given the high cost of auto repair prices and impact of climate change, insurers have experienced record-breaking losses over the last year. The property and casualty insurance sector posted a net combined ratio of 111.8% in 2022, and drivers will continue to see higher prices as they renew coverage.
“Given the lag between regulator approvals and actual rate increases, consumers can expect rates to increase over the next 12 to 18 months. It’s more important now than ever to comparison shop,” Feakins said.
Source: Insurify
Abby Andrews