McQuiston: Why Are Car Insurance Rates Increasing?

Jemez Agency
Serving Los Alamos Since 1963

We often get calls from folks asking why their car insurance rates are increasing, even if they have not had any accidents. There are many factors that determine car insurance rates, including the type of car you own, the zip code you live in and your credit score, but there are also some “hidden” factors that are driving up car insurance rates.

There is an increase in cost per accident that is being driven by two trends: rising car repair costs and rising medical costs covered by auto insurance.  Every year a new car cost more than a new car from the prior year. So does this cost to repair that car.  And every year as your car gets older, the parts to repair your car become less available and more expensive to purchase. And I think we all know how the cost of medical services has increased over the years.

Rising material costs make replacement parts more expensive for all vehicles. For newer vehicles specifically, high tech parts like sensors and cameras will raise prices further. As an example, a Toyota Camry headlight costs $360 in 2013 but cost $1,900 in 2018.

Labor rates have been increasing due to a labor shortage of trained technicians. The old greasy overalls has been replaced by an auto technician with specialized skills.

An increasing number of vehicles are being declared total losses. Due to higher repair costs, the insurance industry declared 28% more vehicles a total loss compared to 5 years ago.

Natural disaster. According to the global insurer Aon, 2010 to 2019 was the most costly decade ever for insurers. In 2019, the United States suffered $68 billion of damages due to natural disasters.

People are driving more. And having more accidents. Driven miles and the number of accidents are back to pre-pandemic levels.

It’s worth noting that insurance companies are regulated by state agencies, and in order to change premiums, each car insurance company has to go through approvals and regulatory processes. That change could be slow — it may take insurance companies months to get their changes approved and implemented.

It is always a good idea to have yearly conversations with your insurance professional to discuss your rates and explore if you qualify for any new discounts available.

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