How Inflation Can Affect Auto Insurance
When it comes to the current impact of inflation, car insurance premiums are no exception. At the start of the COVID-19 pandemic, rates initially declined due to fewer miles driven, only to climb back up. Supply chain issues, labor shortages, more complicated vehicles and higher repair costs have also driven up the total cost of car ownership.
These factors also fuel inflation and are reflected in your monthly premiums. When it’s time to renew your car insurance, here’s what to consider.
What’s Increasing the Cost of Car Insurance?
One aspect behind higher auto insurance premiums was more post-pandemic car accidents. Inflation is another factor, which your premiums then reflect:
- Car Design: Modern vehicles are complex computer systems that require a different set of skills to repair. This evolution has resulted in a shortage of qualified mechanics and driven up costs for parts and related labor.
- Supply Chain Issues: The auto industry is not immune to a slower, less-consistent supply chain. For cars, this has resulted in a shortage of semi-conductor chips, fewer and more costly parts for repairs and delays having parts shipped to dealers and auto body shops. Secondarily, these changes have resulted in a smaller car market with more expensive new and used cars. For insurance purposes, a higher-valued vehicle tends to see higher premiums.
- Inflation: It’s estimated that global inflation increased prices by over nine percent during 2022 alone. This gets folded into the cost of vehicle ownership, from repairs and routine maintenance to car insurance.
- COVID-19 Changes: The pandemic altered how auto body shops approach work. Rather than just perform repairs, shops and dealers start and end with an extensive cleaning process to lessen contamination risks, which tacks on more time and labor.
- Increasing Accidents: Although most people spent less time on the road during the pandemic, some took the opportunity to speed and behave more recklessly. This latter aspect meant that accident fatality rates were flat or increased during the lockdown and have since risen, as more drivers resume their pre-pandemic routines. Insurance carriers have taken this into account, factoring it into overall rates.
How to Lower Your Rates
By the end of 2022, drivers saw premiums increase anywhere from six to over 10 percent. Even with inflation, you can find ways to save on your car insurance premiums:
- Review other carriers and policy options with your agent.
- Continue to maintain a spotless driving record.
- Ask your carrier about discounts, particularly if you’re a longtime customer, added safety features to your car or moved to a safer community. Memberships to certain associations may also provide a discount. If you belong to AAA, this would allow you to remove the towing coverage on your auto policy.
- Reduce coverage for collision, comprehensive or roadside assistance if you’re still driving fewer miles.
- Increase your deductible, particularly if you’re a safe driver with few or no accidents.
- Participate in a mileage or driving-tracking program through your carrier for a more detailed picture of your habits.
- Bundle or pair coverages. Many drivers find that having home or renter’s insurance and auto insurance through the same carrier results in more savings.
- Keep on top of your credit. A lower score often translates to higher insurance rates.
- If you have an auto loan, paying it off will eliminate the need to carry comprehensive and collision coverage. It may also allow you to increase your deductible.
Are you searching for more affordable auto insurance coverage? Work with an agent at HUB/Ion Insurance to explore policies, make adjustments or discuss available discounts. To get started, contact us today.