Over the last couple of years, consumers have had to stretch their budgets to cope with rising costs. Daily expenses like groceries and gas have climbed due to inflation, and auto insurance hasn’t been left out of this trend either.
While the prices of most goods and services have begun to stabilize—with year-over-year inflation at 2.7% in November compared to a high of over 9% during the summer of 2022—the cost of auto insurance continues to strain budgets. According to the latest Consumer Price Index, November saw a nearly 13% increase in auto insurance prices over the previous year.
Auto insurance companies are finding themselves trying to catch up. During inflation’s peak in 2022, the combination of steep vehicle repair, medical costs, and natural disaster-related losses led insurers to shell out more in claims than they collected in premiums, as noted by S&P Global.
The economic resurgence following the pandemic seems to have added fuel to the fire. Scott Shapiro, who leads global insurance at the advisory firm KPMG, notes that a strong economy often results in more drivers on the roads, which can increase the incidence of accidents.
In an effort to balance their books, auto insurers hiked their premiums. Despite inflation showing signs of settling, these companies might not be ready to halt premium increases just yet. Mark Friedlander from the Insurance Information Institute points out that since it took several years to arrive at the current situation, it will similarly take time for rates to return to more moderate levels.
Even though the overall cost of auto insurance may not drop soon, you still have the power to reduce your personal expenses. With today’s easing inflation, prices might eventually level off. Moreover, the competitive nature of the insurance industry could drive companies to lower their rates to win your business. So, if your premiums feel too high, it’s well worth the time to shop around and compare quotes for a better deal.
“Shopping around is key,” says Shapiro. “Lots of factors are changing, from the broader environment to individual circumstances, and there are plenty of options available.”
There are several other strategies to lower your auto insurance costs. Start by comparing different policies for similar coverage to ensure you’re securing the best price. Additionally, maximize savings by taking advantage of all available policy discounts. Opt for paperless billing or pay your policy in full rather than monthly. Consider bundling your auto insurance with other policies, such as home or renters insurance. Safe or low-mileage drivers might explore usage-based insurance quotes. If your vehicle is older, raising your deductible might be worthwhile—while it reduces your premium, be prepared for higher out-of-pocket costs in the event of a claim. Furthermore, if you live in a state that permits, improving your credit score can lower your insurance rates, although states like California, Hawaii, and Massachusetts do not allow credit scores to influence insurance pricing.
