A “perfect storm” has caused car insurance premiums to rise.
- Auto insurance rates are expected to continue to rise in 2023.
- The underlying reason for most of the increases can be attributed to the pandemic.
- There are steps you can take to lower your auto insurance premiums, including increasing your deductible, improving your credit score, and shopping around.
In a word, no. Auto insurance rates are unlikely to drop in 2023. In fact, if you haven’t received a premium increase notice yet, you probably will soon. While drivers are mad (and worried) about the cost of auto insurance, there’s strong evidence that increases are inevitable. Most can be directly attributed to the global pandemic. Here’s why insurance costs are rising.
Supply chain disruptions
COVID-19 literally shut down the world for a while. A factory may have been open long enough to produce auto parts, but then transportation problems arose. Auto repair shops hoping to get access to the auto parts they needed must have felt like they were playing the mole. Once one problem was solved, another arose.
The law of supply and demand kicked in. Those who had access to it could charge more for their coins because the demand was so high. While things are certainly better than they were this time last year, we still have some catching up to do.
Higher car prices
All of these supply chain disruptions have driven up the price of automobiles across the board. This means that putting someone who has totaled their car into a new vehicle has become more expensive. Car dealerships don’t have to offer bargains because there are more buyers than available inventory.
When a major event occurs – especially one that kills over a million Americans – people begin to rethink their life choices. What many discovered during the dark days of the pandemic was that they wanted something different. While they were able to return to work once the restrictions were lifted, they did not want to return to the life they led before COVID-19.
News agencies called it a “great resignation.” As unique as it sounds, it wasn’t the first time in history that millions of people decided to quit their old jobs. The Bureau of Labor Statistics (BLS) reports the number of workers who quit their jobs since December 2000. In 2021, nearly 4 million people quit each month. But in 2019, even before the pandemic, 3.5 million people left their workplaces every month.
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Employees leave to start their own business or to forge a new career path, leaving places like auto repair shops scrambling to fill vacancies. Hiring is more expensive than it once was, as mechanics and other personnel realize their market value.
It is expensive to hire and train a new employee and this expense has been passed on to the consumer.
Something has happened since the country started to reopen. People seem to have changed their driving behavior. Maybe they’re eager to return to life as they once knew it, or maybe it’s the underlying anxiety of American politics. Whatever the reason, road deaths in the United States hit a 20-year high in early 2022.
More accidents mean more claims. More claims means more losses for insurance companies.
Climate change has increased the number of natural disasters. Between hurricanes, tornadoes, floods, wildfires and severe winter storms, insurance companies have their hands full of payouts.
Whenever a severe storm hits an area, you can expect automotive damage throughout the area. The cost of repairing this damage is passed on to higher insurance premiums.
How to lower your premiums
If you receive a notification that your premiums are increasing, there are steps you can take to reduce them. For instance:
- Increase your deductible: The higher your deductible, the lower your premium.
- Group coverage: If you haven’t already, bundle your car insurance with other coverage, such as homeowners insurance or a tenant’s insurance policy.
- Focus on your credit score: The higher your credit score, the lower your premiums. This is because research has shown that people with poor credit scores tend to make more insurance claims. If your score isn’t quite where you want it to be right now, take steps to increase it.
- Check the discounts you might be missing: Take a fresh look at the discounts offered by your insurer. There may be some you haven’t taken advantage of yet.
- Compare the prices: There’s no harm in contacting other car insurance companies to find out if you can get a lower rate.
It is possible that rates will be pushed back by the competition once things normalize. In the meantime, remember that there are steps you can take to prevent your car insurance premiums from going broke.
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