Consumers nationwide have been dealing with price surges due to inflation and may now struggle more due to rising car insurance costs.
What’s behind the increases?
The Consumer Price Index for All Urban Consumers increased by 0.4%, the same as in February, according to a news release from the U.S. Bureau of Labor Statistics.
A new report by Bankrate found that the national average cost of full coverage car insurance increased by 26% over the last year. To figure out the “true cost” of car insurance, the website analyzes what percentage of household income is spent on an annual full-coverage car insurance policy.
The national average annual premium for full coverage is $2,543, or $211 monthly. Florida ($3,945 per year) and New York ($3,840 per year) drivers face the highest car insurance cost. Texas’s average cost — $2,620, or 3.62% of income — is slightly higher than the national average. Texas ranks No.36 out of 50 states in true cost ranking.
The state with the lowest cost of auto insurance is Vermont, with $1,353 per year.
“Auto insurance rates have been rising at a breakneck pace,” Greg McBride, chief financial analyst for Bankrate, told CBS News. “And though the pace of increases will eventually slow, that doesn’t mean premiums are coming down.”
DX contacted Bankrate, and Shannon Martin, a Bankrate analyst, shared some comments.
“Car insurance is reactionary, and these premium increases reflect the losses carriers experienced over the last few years from more frequent extreme weather claims, rising costs of parts and labor, and increased car crash fatalities,” Martin told The Dallas Express. “While some factors impacting car insurance have improved, carriers paid for prior losses while inflation was at an all-time high.”
“Car insurance companies filed for increases throughout 2023 and this year. Since these changes hit policyholders upon renewal, it can take carriers up to a year to collect on premiums, and these rates may continue on an upward trajectory for the rest of this year,” Martin added. “In a healthy insurance market, we see rate stabilization where the price fluctuates slightly, but that might not happen until sometime next year.”
One of the main reasons for the surge in costs is a rise in the cost of claims and expenses from those claims, according to Robert Passmore, vice president of personal lines at the American Property Casualty Insurance Association (APCIA).
“It’s not just that inflation has impacted insurance premiums. It’s that inflation has impacted the things that auto insurance pays for, particularly on the physical damage side,” Passmore told DX in January.
Passmore also noted that as technology advances in newer vehicles, repairs cost more.
Increasing labor costs also help explain why insurance premiums have skyrocketed over the last year. As vehicles become more technologically advanced, they naturally require more training and specialty skills from technicians to repair, said Passmore.
