Car Insurance Rates Are Rising Faster Than Anything Else in the Economy
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Inflation is cooling for most items in the economy, but auto insurance continues to be an exception to the trend. New data suggests that hikes in car premiums continue to outstrip those of the economy as a whole, and the gap may even be widening.
In a new survey by Experian of over 1,000 car owners, more than half (52%) of respondents reported their car insurance premiums had increased in the past six months. And the hikes were likely to be substantial, according to the latest federal inflation numbers.
Car insurance premiums rose by an average of 16.9% from June 2022 to June 2023. That’s the most of any expenditure tracked by the Bureau of Labor Statistics. From May to June alone, rates rose by an average of 1.7%, which suggests the rise in premiums is accelerating. (By contrast, annual inflation averaged 3.0% across the economy as a whole, the index reports.)
Experts say insurance companies are facing higher costs in a variety of areas — including auto repairs, medical care and car replacements — and those increases are being passed along to policyholders. High rates for collisions and vehicle theft are also contributing to the upward trend in car insurance prices.
The news is not all bad. Car insurance prices stayed roughly the same for 34% of respondents to the Experian study, and 14% say they’re paying less than they were in 2022. There’s also evidence that more drivers facing higher insurance costs are shopping around among carriers.
Why it matters
Car insurance represents a significant part of Americans' budgets — typically about 2.5% of household spending — so as premiums rise sharply, customers will take notice.
- Drivers are indeed shopping around for better car insurance rates, according to Experian's data. In the past year, 41% of auto insurance customers shopped around for rates and 22% of customers switched insurance providers, the survey found.
- What's next for auto insurance prices? Unfortunately, experts expect premiums to rise even further in the months ahead. A key reason is that vehicle repair and replacement costs will likely remain high, according to a report from Carrier Management, an information service for the insurance industry.
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