Why Has My Insurance Quote Gone Up

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Auto insurance rates in the United States have risen due to inflation, supply chain disruptions, rising maintenance costs, and rising costs of medical services.

Why Has My Insurance Quote Gone Up

By: Daniel Robinson By: Daniel Robinson Author Daniel is a staff writer for Guides and has written for several automotive news sites and marketing companies in the US. USA, UK and Australia specializes in car financing and care. Daniel is an authority on the Guides team on auto insurance, loans, warranty options, auto services and more.

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Edited by: Rashon Michner Edited by: Rashon Michner Managing Editor Rashon Michner is a Guides team editor with over 10 years of experience in personal finance and insurance.

You’re a safe driver, haven’t bought a new car or changed your insurance policy, but your rates still go up. Of course, you’re wondering, “Why did my car insurance go up?” In 2023, your car insurance rates may increase due to certain factors such as inflation, rising maintenance costs, or severe environmental incidents in your area.

Our Guides team will help you understand why your car insurance has gone up and offer ways to save money. We’ve reviewed the best car insurance companies and will highlight some of our top picks.

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If you’re wondering why your car insurance has gone up, you’re not alone. One of the most common reasons is that your insurer has increased your rates.

Many insurance companies have increased rates in 2022, either to account for inflation, to recover funds after a natural calamity, or to cover higher claims. Here are some examples (not an exhaustive list) according to S&P Global Market Intelligence:

It is clear that auto insurance rates have increased in 2022. But why exactly is the cost of your auto insurance policy so high? Let’s take a look at six reasons for the rate hike.

Since the beginning of 2021, inflation has increased in the country due to several reasons. The COVID-19 pandemic has caused production shortages and traffic jams, the economic response to the pandemic has increased liquidity in the market, and the Russian invasion of Ukraine in 2022 has boosted oil and commodity prices. As inflation continued in 2022, car insurance was only a matter of getting more expensive.

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According to the Bureau of Labor Statistics, the consumer price index rose 7.7% between October 2021 and October 2022. The BLS reports that auto insurance premiums rose an average of 12.9% during that period. If your car insurance rates have increased by about 10%, you’re in the same boat as many other drivers.

Similarly, the bureau reports that average labor costs increased by 5% between September 2021 and September 2022, meaning auto insurance companies may be spending more on their staff.

Vehicle maintenance costs have also increased over the past year. Since an auto insurance policy pays for repairs after an accident, this is another reason why insurers increase their rates.

“The insurance industry as a whole is driving up rates,” says Nathan Weller, Fit Small Business Insurance staff writer and licensed claims adjuster in 13 states. “There are many factors, but they all boil down to the higher loss rates companies are experiencing. .

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“Since the end of the lockdown, supply chain issues and back-up stores have caused the costs of all claims, including small claims, to skyrocket,” he adds.

According to the BLS, between October 2021 and October 2022, motor vehicle repair and maintenance will increase by an average of 10.3%. In particular, the cost of bodywork increased by an average of 13.1% and repair costs by 13.2%.

A repair that used to cost $100 will now cost an average of $113 in 2021. But if a particular component is lacking, maintenance will cost more than in 2021. Add to that the increased labor costs and car insurance. Companies have to spend more money on maintenance. Those costs affect average rates and pass the increase on to insurance policyholders.

The COVID-19 pandemic closed factories and trade routes around the world in 2020. Auto manufacturing is still recovering and some parts are still hard to find and source. Specifically, Automotive News reports that manufacturers cut approximately 4.26 million vehicles from production in 2022 due to the microchip shortage.

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Supply chain problems have also affected repair shops across the country. Some parts that were easy to get before the pandemic are hard to find now. A mechanic may have to order a part overseas and wait weeks to complete a repair that would have taken days before. If you spend a lot of time in the car shop, you’ll need a rental car for a longer period of time.

Healthcare costs have also increased in recent months. According to the BLS, medical costs increased an average of 5.4% between October 2021 and October 2022. However, the amount an average person pays for health insurance has increased by 20.6%.

Medical Payments Cover (MedPay) and Personal Injury Protection (also known as PIP Insurance) cover medical bills for you and your passengers in the event of an accident. Because auto insurance companies have to pay more for medical services, they raise rates to compensate.

When an area of ​​the country experiences an increase in severe weather or natural disasters, the number of vehicle damage claims increases in that area. Auto insurance companies may raise rates in the state to compensate. Even people who don’t file a claim may pay higher rates in the area after an environmental incident.

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An auto insurance company expects a certain number of cars in a state to be damaged by floods each year. Now, if a strong storm causes 10 times the damage of a flood, the money to pay all those claims will deplete the company’s reserves. As the company reevaluates its rates, it may raise prices to recoup funds.

At the beginning of the COVID-19 pandemic, many people stayed at home and avoided contact with others. That means there were less vehicles on the road. Fast forward to 2022 and people are back to pre-Covid driving levels. Accident claims have also increased with the increase in driving.

Weller provides an example of how labor and supply chain problems can make even a minor repair more expensive for insurance companies. In this case, the driver’s insurance company pays for the plaintiff’s headlight repairs.

“Even if the car can be driven, legally they can’t drive it,” he says. “But there are no body shops that can look at the car for three months and the headlights are off for four months.

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“There’s also a shortage of rental cars because rental companies have sold off a significant portion of their fleet during Covid to generate income. Now a small claim can cost thousands, months of transportation costs running out of limits. Plaintiffs waiting at the shop to get their headlights fixed.

According to S&P Global, many US insurers saw double-digit percentage increases in their loss ratios in the first quarter of 2022. The auto loss ratio shows how much an insurer spends on claims per dollar of premiums collected. For example, Allstate is spending 20.4% more on claims compared to premiums than the previous year.

The combined ratio compares total losses and expenses to premiums. A ratio below 100 means the company is spending less on claims than on premiums, while a ratio above 100 is the opposite. Allstate’s combined ratio for the first quarter of 2022 was 102.1%, so it pays more in claims than it receives in premiums.

So far we have discussed the factors that affect overall car insurance rates. But there are various factors that affect your rate. If you’re wondering why your auto insurance is so high, consider these as parts of the equation.

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Auto insurance rates vary by zip code and by neighborhood. If everything else remains the same in your situation, you may see a rate increase if you move to a new location.

In general, the older you get the lower your car insurance rates. However, older drivers pay slightly higher rates than middle-aged drivers. People will see their rates go up when they turn 65.

If you’re in an accident or get a speeding ticket, the riskier you are to insure, the higher your rates will be. In this case you should expect a rate hike. However, the increase may surprise. This can happen if you forget to mention a moving violation on your driving record when you sign up for insurance, and the company finds out later.

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