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Policyholders facing higher insurance premiums due to inflation choosing to drive less, switch vehicle type or carrier

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A recently released insurance trends report by Insurify looked at how inflation has impacted car insurance premiums by reviewing more than 40 million of their consumer quotes.

Insurify noted that weather patterns, crime rates, and population density contribute to regional variation in car insurance rates, according to the Insurance Information Institute, and state-level legislation does as well through varying driver attributes that insurers use to set rates and how much minimum coverage drivers are required to carry. Other factors that can affect insurance premium costs are car type, marital status, driving record, homeownership, age, gender, education, and credit score.

Michigan, Louisiana, and New York pay the highest premiums while Hawaii, North Carolina, and Wyoming pay the lowest, according to Insurify. They also found that city drivers also pay 15% more, on average, for auto insurance.

To curb increasing costs of car insurance, more than 1,200 Insurify survey respondents said they’re considering driving less (65%), purchasing an electric vehicle (EV) or hybrid (30%), switching insurance carriers (30%), moving closer to public transportation or walkable areas (16%), or dropping insurance (10%).

CCC Intelligent Solutions Vice President of Consulting and Services Bart Mazurek said during this year’s MSO Symposium in Las Vegas last week that traffic volumes are returning to pre-pandemic levels but less accidents are happening due to a decrease in traffic congestion caused mostly by remote work.

As for insurance, Insurify CEO Snejina Zacharia told Yahoo Finance, “While we saw the economy accelerate and demand rebound following the pandemic, Americans’ overall cost of living, including insurance, increased in 2022 due to built-up pandemic-related disruptions and increased inflation.”

A survey of 2,000 drivers in August by U.S. News & World Report, conducted in part to find out how inflation and the COVID-19 pandemic have affected consumers, found that 49% are driving less due to the pandemic and 61% because of higher gas prices.

AAA reported in September that the average yearly cost to own and operate a new vehicle has increased to $10,728, or $894 per month, which is $1,000 more than in 2021. Sell prices on used vehicles have skyrocketed over the past couple of years and the average age of vehicles on the road has also increased — all factors that stem from the pandemic and inflation. Gas prices are the most significant factor that drove up this year’s average, according to AAA.   

Due to the current economic climate, Insurify noted in its findings that “it’s hard to anticipate which companies will increase their rates and when.”

“We encourage drivers to compare quotes from at least four to five companies before picking a policy. With inflation levels so high this year, drivers can also compare quotes every six months or so to ensure their current policy and premium are best for their needs. Keep in mind, some insurers may offer lower
premiums to customers who’ve been with one company for more than a year.”

Seeking out discounts from carriers through bundling home and insurance policies and AAA membership, for example, can also be helpful in lowering premiums with just one discount potentially cutting 15% off yearly car insurance premiums, according to Insurify.

“One-third of drivers are not taking advantage of any discounts, including 16% that don’t take advantage even if they know they qualify for one or more,” Insurify said. “Finding a policy with one or more discounts can be an easy way for drivers to save on car insurance.”

More consumer savings tips are provided near the end of the findings document, which is available here.

The U.S. insurance market’s “current volatility” likely won’t stabilize until at least mid-2023, according to Betsy Stella, Insurify’s vice president of insurance partnerships. “Based on our comprehensive research and feedback from over 100 carriers, the general consensus is that it will be eight to twelve months [from fall 2022] before the market stabilizes,” she said in a statement. “Some think it could be several years before a soft market returns.”


Featured image credit: Mohamad Faizal Bin Ramli/iStock

More information

As auto insurance rates increase, legislative & nonprofit actions crop up

Allstate, GEICO top list of carriers raising auto insurance premiums

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