Why Car Insurance Costs are Climbing: Insights in Expensive Premiums

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Car insurance costs rising

Summer is ending, and many people still yearn for the open road after suffering through two years of a pandemic. In fact, drivers nationwide are shopping for a new car, but car insurance costs are rising.

Full-year retail sales are forecast to increase from 11.7 million in 2022 to 12.4 million in 2023 according to Cox automotive sales. Cox chief economist Jonathan Smoke noted on the firm’s mid-year review that, “Consumers always find a way to buy new wheels despite the circumstances. Americans are not only car-dependent but have a love for cars.”

“Heading into the second half of the year, however, the market will likely see fewer upside surprises, Smoke added. “The market will still be limited by total available supply, but demand will also be limited by the level of prices and rates, which are not likely to come down enough to stimulate more demand than the market can bear.”

Outpacing Inflation

Prices are not the only determination for many buyers. There are other factors to consider. “Auto insurance costs were up about 15% in March from a year earlier, significantly higher than the latest reading on overall inflation of 5%. The average annual premium is about $2,000”, according to the personal finance website Bankrate, says Ann Carns of The New York Times.

Plus, car insurance prices are expected to continue rising. The chief executive of the insurer Progressive said in a shareholder letter that the company planned to be “aggressive with raising rates over the remainder of the year.” Allstate said it expected to pursue additional increases in 2023 “to improve auto insurance profitability,” Ms. Carns added.

Speak With Your Agent

Joseph D. Sanzo, senior insurance professional at Barnum Financial Group, states, “Claims are becoming much more expensive and drawn out. So even if you haven’t had any claims or don’t drive as much, you are still going to see your rates increase.”

Sanzo continues, “A perfect example would be to look at the cost of vehicles. A 2018 Honda Civic Sport MSRP was $20,150 brand new, whereas a 2023 Honda Civic Sport MSRP is $25,350 — a 26% increase in just five years. With the cost of vehicles only being a portion of what is paid during a claim — other factors to consider are medical costs for injuries and labor costs — most people are only seeing increases in their premiums of anywhere from 5%-25% over that same five-year time. There are many factors that can positively impact your rates, and having a discussion with your agent can help find the best options for you.”

To learn more, contact your Barnum representative today. Don’t have one? Click to get a complimentary financial assessment.

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