While auto insurance rates fluctuate from time to time, you may not realize why. Higher premiums can certainly be frustrating but it’s important to know what all insurance carriers base their decisions on.
While inflation dipped to 2.5% in September 2024, the average cost of auto insurance is not slowing down. According to the Bureau of Labor Statistics, the cost of a full coverage auto insurance policy spiked to 16.5% from August 2023 to August 2024.
One reason inflation remains high is because more drivers have returned to work and the roads since the pandemic. When the pandemic began, people were working from home and there were fewer accidents and claims, allowing insurance companies to return an estimated $14 billion in premiums to United States policyholders, according to American Property Casualty Insurance Association.
Although the global supply chain issue has also improved, the availability of replacement parts is another factor that is still impacting auto insurance claims costs. When the pandemic began and countries were locked down, many manufactured goods, including those in the auto industry, were halted – which caused a ripple effect across the world. These disruptions have not only caused repairs to take longer because auto repair shops need to wait for the parts to come in, but the cost to replace auto parts like bumpers, side panels, windshields and semi-conductor chips have skyrocketed due to the increased demand – all leading toward rate hikes to compensate.
Still, other factors that determine what you pay annually for car insurance are the type of coverage you have, your driving record and where you live, according to the Insurance Information Institute.
Driving Record
Speeding tickets, a DUI, or any moving violation.
New Car
Adding a new car may cause premiums to increase as new cars are more costly to repair or replace when there is a claim.
At-Fault Accident
At-fault accidents can be an indicator of a driver’s potential for future at-fault accidents.
More Complex Cars
Newer cars feature safety sensors, entertainment systems and special technology to make it all work. This increases the cost to repair or replace vehicles.
Policy changes, such as adding a newly licensed driver, may increase insurance costs.
Overall Claim Trends
In recent years, speeding, distracted driving, and impaired driving, have increased the number of accidents, which drives up rates overall for auto insurance.
Inflation
Just like everyone else, insurance companies are paying more for things like auto parts, labor, rental rates and medical fees. In some cases, auto accident and repair costs are escalating much higher than the rate of inflation.
Loss of Discounts
Some discounts are required to be validated annually or the driver may need to reapply for the discount. An example is policyholders who receive the Good Student discount need to provide a report card annually to continue receiving the discount.
So how can you lower the costs of what you pay for auto insurance? Most insurers like MAPFRE offer discounts if you buy at least two kinds of policy from them, typically called “bundling.” For example, if you bundle your auto insurance and home insurance together, you could qualify for a reduced rate.
And while discounts vary from state to state, other discounts you could qualify for with MAPFRE are:
- Bundle your Auto and Home Discount
- Paid-in-Full Discount
- Good Student Discount
- Student Away from Home Discount
If you’re not exactly sure what your auto insurance policy covers or what discount you might be able to get, an independent agent in your state can always review your personal information to make sure you have the right coverage to suit your individualized needs. And if you are not a MAPFRE customer in Massachusetts yet, you can always get a fast, free car insurance quote in Massachusetts today to get outstanding coverage at a great price.
Check out the flyer below as a quick reference guide for what determines auto insurance rates or you can download a PDF for reference.
