Are Car Insurance Rates Going Up?

If inflation hasn’t been noticeable to you over the past few years, it’s probably become more apparent in 2022. Gas prices are continually rising, housing costs are off the charts, and new and used cars are more expensive than ever. With all of these rising costs surrounding you in 2022, you may be wondering: are car insurance rates going up too?

The short answer is yes; auto insurance rates are increasing slightly. However, the long answer is a bit more complicated.

Read on to learn more about rising car insurance rates, why they’re increasing, and what you can do about it. Then request a quote through Encore Insurance to see how you can save money on your current auto insurance rates.

Why Are Auto Insurance Rates Increasing in 2022?

Several current events have influenced the costs of goods and services across the U.S. — including car insurance. Here are the most significant factors impacting car insurance costs:

Inflation

If you’ve noticed the cost of many goods and services increasing lately, inflation is one of the primary culprits. Inflation refers to the general progressive increase in the costs of goods and services. While inflation increases prices every year, this increase was slightly higher than usual between 2021 and 2022. 

The Bureau of Labor Statistics releases a 12-month analysis table each month comparing the cost of goods from one year to another. This table shows that between February 2021 and February 2022, the unadjusted percentage change of all items was 7.9%. This was the largest percentage change since January 1982.

More specifically, between February 2021 and 2022, the prices of new vehicles rose by 12.4%. Notably, the value of used cars increased even more significantly at a whopping 41.2%.

Typically, the car market impacts auto insurance rates. With these figures in mind, it’s easy to see why insurance rates are increasing.

Supply Chain Disruptions & Labor Shortages

The COVID-19 pandemic has impacted numerous processes worldwide, and many supply chains have taken a direct hit. Vehicle manufacturing requires specialized parts and equipment. If motor companies cannot obtain the parts they need from their typical sources, they must slow production or pay more for the same equipment.

Meanwhile, nationwide labor shortages are also impacting the car market. Some car manufacturers cannot maintain the same number of employees they did pre-pandemic, slowing their production as a result.

Part and labor shortages have led manufacturing companies like Ford, Toyota, and General Motors to increase their prices to maintain profit margins. Because vehicles are more expensive overall, auto insurers must adjust their costs accordingly — causing premiums to rise.

Changing Driving Habits

At the beginning of the pandemic, many people across the country transitioned from working in offices to working from home. However, by 2021, companies had begun requiring workers to return to the office, and many people resumed their pre-pandemic driving behaviors. As a result, a significant increase in accidents occurred compared to the previous year.

According to the National Highway Traffic Safety Administration, 18.4% more accidents occurred in the first half of 2021 than in the first half of 2020. Many insurance companies increased their rates to reflect this change.

Personal Factors That Impact Your Insurance Rates

If you’ve noticed your insurance rates increasing over the past few years, a few personal factors may also be at play. Insurance companies examine several characteristics to determine your specific car insurance rates. If any of the following factors have changed recently, your rates may have increased accordingly:

Vehicle Type

The type of vehicle you own is one of the biggest factors contributing to your insurance rates. When insurance companies determine your rates, they consider how much money your car is worth. After all, if your car became totaled in an accident, your insurer would need to pay for the total replacement cost.

Driving Habits

Your rates increase slightly whenever you file a claim with your auto insurer. However, your general driving habits can also impact your rates.

Some insurance companies provide car tracking devices that monitor your driving habits to determine your safety on the road. Others rely on your claims and traffic violation history to assess your driving behaviors.

As a result, if you’ve broken any traffic laws lately, your insurance rates may have risen. For example, a distracted driving ticket could increase your rates significantly.

Credit Score

Your credit score may also impact your rates. Many insurance carriers believe that credit information is very predictive of future accidents or insurance claims which is why most insurers use this information to help develop more accurate rates. Each insurer has its own method for evaluating this credit information.

Demographic Factors

Your age impacts your car insurance rates. Young drivers tend to have higher rates than older ones, as they’re statistically more likely to be involved in car accidents.

Coverages, Limits, And Deductibles

Finally, your insurance coverage, limits, and deductibles contribute to your annual premium. Typically, the more coverage you have, the higher your premium. However, if you choose to pay a higher deductible, you can lower your premium slightly.

Tips to Save Money On Car Insurance

If you’re struggling to keep up with car insurance rate increases, you’re not alone. Thankfully, you can take a few steps to save money on your car insurance premium:

Check For Discounts

You can search for discounts to decrease your premium costs. For example, some companies offer good driving discounts, allowing you to reduce your premium every year you are accident-free. Others provide “pay in full” discounts, allowing you to save money by paying your entire annual premium upfront rather than sending a check each month.

Consider Bundling Policies

Some insurance companies offer discounts when you obtain your homeowners insurance and auto insurance through them. These “bundling” discounts can save you money on both policies.

Quote Around

The easiest way to save on your car insurance is to switch to a cheaper company. Most insurance companies adjust their rates each year. If you find that your current rate is too high, you can quote around with different companies to see which one can offer you the best rate.  

At Encore Insurance, we make it easy to find the most affordable insurance rates for your needs. We’ll examine your existing auto insurance policy and quote you with the insurance companies we work with. Then, we’ll present you with the cheapest premium.

Contact our Encore Insurance team today at 248-466-0200 to get your free auto insurance quote.