- Auto insurance rates are likely to keep rising in 2023.
- The underlying reason for most increases can be traced back to the pandemic.
- There are steps you can take to lower your auto insurance premiums, including increasing your deductible, improving your credit score, and shopping around.
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In a word, no. Auto insurance rates are unlikely to go down in 2023. In fact, if you haven’t received a premium increase notification yet, you probably will soon. While drivers are hopping mad (and worried) about the cost of auto insurance, there is solid evidence that increases are inevitable. Most can be traced directly back to the global pandemic. Here’s why insurance costs are up.
Supply chain disruptions
COVID-19, quite literally, shut the world down for a time. A factory might have opened long enough to produce auto parts, but then transportation issues arose. Auto repair shops hoping to gain access to the car parts they needed must have felt they were playing whack-a-mole. Once one issue was addressed, another popped up.
The law of demand and supply came into play. Those who did have access could charge more for their parts because the demand was so high. While things are certainly better than they were this time last year, we’re still playing catch up.
Higher price of cars
All those supply chain disruptions have driven the price of autos up across the board. That means that putting someone who totaled their car into a new vehicle has become more expensive. Auto dealers don’t have to offer sweet deals because there are more buyers than available inventory.
When a major event occurs — especially one that kills more than 1 million Americans — people begin to rethink their choices in life. What many discovered during the dark days of the pandemic was that they wanted something different. If they were able to go back to work once restrictions were lifted, they did not want to go back to the life they led before COVID-19.
News organizations referred to it as the “Great Resignation.” As unique as it seemed, it wasn’t the first time in history millions of people decided to leave their old jobs behind. The Bureau of Labor Statistics (BLS) has been reporting on the number of workers who quit their jobs since Dec. 2000. In 2021, nearly 4 million people quit each month. But in 2019, even before the pandemic, 3.5 million people were leaving their workplace each month.
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Employees leave to build their own businesses or to forge a new career path, leaving places like auto repair shops scrambling to fill vacant jobs. Hiring is more expensive than it once was, with mechanics and other personnel realizing their market value.
It is expensive to hire and train a new employee and that expense has been passed on to the consumer.
Something has happened since the country began to reopen. People appear to have changed their driving behavior. Perhaps they’re anxious to get back to life as they once knew it, or maybe it’s the underlying anxiety of American politics. Whatever the reason, U.S. traffic deaths hit a 20-year high in early 2022.
More accidents mean more claims. More claims means greater losses for insurance companies.
Climate change has increased the number of natural disasters. Between hurricanes, tornadoes, flooding, wildfires, and severe winter storms, insurance companies have their hands full with payouts.
Each time a severe storm hits an area, you can expect damage to auto across the region. The cost of repairing that damage is being passed on via higher insurance premiums.
How to lower your premiums
If you receive a notification that your premiums are going up, there are steps you can take to get them down. For example:
- Increase your deductible: The higher your deductible, the lower your premium.
- Bundle coverage: If you haven’t already, bundle your auto insurance with other coverages, like homeowners insurance or a renters insurance policy.
- Focus on your credit score: The higher your credit score, the lower your premiums. That’s because research has shown that people with poor credit scores tend to make more insurance claims. If your score isn’t quite where you want it at the moment, take steps to boost it.
- Check on any discounts you might be missing: Take a fresh look at the discounts available through your insurer. There may be some that you have yet to take advantage of.
- Shop around: There’s no harm in contacting other auto insurance companies to learn if you can snag a lower rate.
It’s possible that rates will be pushed back down by competition once things normalize. In the meantime, though, remember that there are steps you can take to prevent your auto insurance premiums from breaking the bank.
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