Understanding Why Auto Insurance Rates Have Spiked In Recent Years

The cost of just about everything is significantly higher in 2024 than it was in 2020. But some things have become especially expensive over the past few years … and as many motorists will confirm, car insurance belongs on that list.

Breaking down the data

Recent economic reports have shown that inflation remains hotter than expected — and according to the latest consumer price index, auto insurance rates have been at the forefront of the trend. 2023 was a year of especially rapid rate increases, with the cost of a typical policy last month tipping the scales at 20% higher than just one year earlier.

Compared to January 2020, current rates are a whopping 38% higher, far outpacing the average inflation rate over the same period.

Cause and effect

While there’s no denying the fact that insuring a car has gotten much more expensive, the insurance companies aren’t offering many details to explain the cost increase.

Nevertheless, industry insiders have pointed to a couple of factors that seem to justify those price hikes … at least partially.

• Bigger risks: Studies indicate that drivers have been more distracted and aggressive in general since the pandemic, which correlates with more crashes (and increased liability for insurers). Cambridge Mobile Telematics executive Ryan McMahon explained: “Since COVID, we saw this incredible increase in distracted driving. You could almost track it by the day schools started to shut down.”
• More complexity: A generation ago, cars were largely utilitarian modes of transportation unlike the rolling high-tech computers they are today. EVs are in a class of their own when it comes to repair costs, but all new vehicles contain components and materials that are much more expensive to fix or replace than similar vehicles sold just a couple of decades ago.

Chris Agee February 22nd, 2024

Share this story: