Car buyers may be catching a break as vehicle prices start to dip, but there’s a new financial speed bump on the road: soaring auto insurance costs.
A recent report from Insurify, an insurance comparison platform, reveals that U.S. drivers are facing a steep climb in premiums.
The average cost for full auto coverage hit $2,329 in the first half of 2024. That’s a 15% jump from last year and a whopping 48% increase since 2021. And it’s not over yet – by year’s end, that figure is expected to reach $2,469.
The cost of car insurance has increased 52.9% under the Biden-Harris administration. This is unsustainable for the 92% of American households that own at least one car!
— Rep. Anna Paulina Luna (@RepLuna) August 6, 2024
Some states are getting hit even harder. Minnesota is bracing for the biggest shock, with rates projected to surge 61% this year. Chase Gardner, Insurify’s data insight manager, explained why:
“Minnesota has long been seen as a safe haven from severe weather. But insurance companies are having to rethink that assumption.”
The state saw $1.8 billion in damages from a single hailstorm in 2023.
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On top of that, insurance fraud is on the rise. The Minnesota Commerce Fraud Bureau reported an 11% increase in fraud investigations in 2020 compared to the previous year.
Missouri isn’t far behind, with rates expected to jump 55%. Like Minnesota, it’s dealing with more extreme weather events than in the past. Gardner noted, “These states used to be pretty cheap for insurance. Now they’re catching up to the national average, and they’re doing it fast.”
California rounds out the top three, facing a projected 54% increase. The Golden State froze insurance rates during the pandemic, and now companies are playing catch-up. Some are asking for big hikes, while others are leaving California altogether.
So what’s driving these increases across the board? It’s a perfect storm of factors. Car prices shot up after the pandemic due to supply chain issues and high demand. This means vehicles are more expensive to replace and repair.
Adding to the problem is a shortage of mechanics. The TechForce Foundation reports that the number of graduates from automotive programs has dropped 20% since 2020. Fewer mechanics mean higher repair costs.
Insurance companies are also trying to recover from a tough year in 2021, which saw a spike in fatal accidents. The Insurify report summed it up:
“Insurer losses come from a mix of inflation pressures – like pricier repairs and more expensive new cars – and unprecedented climate disasters driving up claims in states that haven’t seen much of this damage before.”
Insurify claims climate change as becoming a bigger factor in auto insurance, not just home coverage. Insurers now have to consider the risk of damage from hail, wind, and falling objects in areas that were once considered safe.
Betsy Stella, vice president at Insurify, predicts this trend will continue: “Climate risk will likely start to play a role in new areas. As we see more tornadoes, hail, and flooding in unexpected places, insurance companies will have to factor that into their pricing.”
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For drivers, this means it’s more important than ever to shop around for insurance and consider ways to lower their premiums.
