Why are car insurance premiums increasing and what can I do about it?

If you’re like most people, you’re probably asking yourself:

• Why are car insurance rates rising?
• Is there anything I can do to lower my car insurance?

In this article we will discuss factors influencing the market, ways to help lower your car insurance price and explain how optional insurance packages can help reduce out-of-pocket costs in the event of a claim.

Why are car insurance prices rising?

There are many reasons for the current car insurance increases in the market. Here are some of the notable ones:

Pandemic and post-pandemic driving habits

Starting in early 2020, people started staying at home due to the pandemic. They generally drove less, resulting in fewer accidents. In 2021, people began to return to pre-pandemic behaviors such as driving more often. More cars on the road generally mean the likelihood of more accidents. There has also been an increase in the severity of car accidents.¹

Increased vehicle value

Another contributor affecting the auto insurance market: The value of most vehicles – both new and used – is increasing. Actually, used car prices have increased by 26.4%; new car prices have risen 9.8%.²

What is this due to? Like many of the other price increases happening in the US and around the world today, there has been an increase in demand for cars, SUVs and trucks – and their parts – at a time when supply is dwindling.

People still want new vehicles for the same reasons they always have:

• Replaces aging cars.
• Expanding families.
• Indulging passions for cars.

In addition, many of the people who moved out of the cities and into the suburbs and rural areas during the pandemic now need cars for transportation. This has created a new form of demand beyond the typical reasons individuals buy new cars.

Vehicle supplies are down in large part because key materials like semiconductors, needed for the computers found in cars today, experienced a manufacturing disruption during the pandemic. Although manufacturing has resumed, current supply still falls short of existing and pent-up demand. Like many other products imported into the United States, countless new cars and the components to build them sit on ships and docks, waiting to be transported to dealers and factories across the United States.³

More expensive cars and parts also make repairs and replacements more expensive. From October 2021, average car insurance costs increased by 20% and parts costs by 6%.⁴ This is another factor that affects the car insurance market.

Additional factors that can affect car insurance rates

There are other factors unrelated to national and global events that can increase your car insurance rates:

• If you have claimed your insurance in the last year.
• If you or someone on your policy has received a speeding ticket or other driving citation.
• A higher number of claims in the area you live in indicates that there may be more accidents related to weather changes, higher theft rates, more incidents of vandalism or other issues that the insurer has to cover.
• If you moved to an area with a higher risk than where you previously lived.
• You may have taken advantage of insurance discounts in the past for which you no longer qualify.

What you can do to lower your insurance rates

Although some insurance price increases are out of your control, there are things you can do to keep them in check.

• Practice safe and healthy driving habits. Make sure everyone on your policy obeys all traffic laws and drives carefully, especially in difficult conditions and bad weather. This helps avoid tickets and accidents that can raise your premium rates.
• Register for telematics. If you and the people on your policy drive safely and carefully, why not use it to save money? Telematics collects information about your driving habits in real time. By signing up for a telematics program such as IntelliDrive® from Travelers, you can save on the first period of your car insurance. At renewal, safe driving habits can lead to savings, although riskier driving habits can result in a higher premium.**
• Change your preferences to become a digital customer. There may be a reduction in premiums for customers who engage digitally. These savings are given to customers who register paperless and register with the carrier’s application. Travelers offer a digital car discount^† for customers who have paperless, register on their application and register in IntelliDrive®.***
• Review coverage. If you haven’t checked your auto insurance and other coverage lately, review it with your insurance agent or a Traveler representative. They may find that you are wearing duplicate or unnecessary protection. Additionally, they may be able to provide some ideas on how to make your coverage more affordable.
• Increase your deductible. Often, an increased deductible can help lower premiums. However, remember that you will be responsible for the excess out of pocket and must always have enough cash on hand to cover your excess if you need to make a claim.
• Look for discounts. Check if you are eligible for discounts such as multi-policy, EFT (Electronic Funds Transfer)^† or good student. Your independent agent or Traveler representative can help you find ways to save.

Get the most out of your car coverage

In addition to typical coverage, find out if your carrier can provide you with additional safe driver benefits. For example, Travelers offers:

• Premier Responsible Driver Plan® can lower your deductible by $50 per month and up to $500 for every six months you drive without an accident or major violation, along with accident forgiveness, which allows you to be in a single accident within a certain period of time without increasing insurance costs .^‡
• Premier New Car Replacement® can cover the cost of replacing your new vehicle with a brand new vehicle of the same make and model if your total for the first five years of ownership.
• Premier Roadside Assistance® can provide additional benefits at the side of the road if you have car problems, such as a dead battery, and become stranded.^§
• Loyalty benefits. Travelers offer car loyalty benefits such as incident leniency, youth leniency and longevity.

The point

Talk to your local Bolder Insurance Advisor to learn more about car insurance and discounts to save you money.

Sources
¹https://www.nhtsa.gov/press-releases/traffic-fatalities-estimates-jan-sept-2021
²https://www.bls.gov/news.release/archives/cpi_10132021.htm
³https://www.nytimes.com/2021/04/23/business/auto-semiconductors-general-motors-mercedes.html
⁴https://227gsr5ihx54be8by2hxnudd-wpengine.netdna-ssl.com/wp-content/uploads/2021/10/10-Oct-Trends.pdf

This article is provided by Travelers Insurance, a Bolder Insurance partner.