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Auto Insurance Rates Rose 20% Last Year

It's the biggest jump since 1976 and the 16th consecutive month of annual gains exceeding 10%, according to the Bureau of Labor Statistics.
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auto insurance rates rose 20% last year

Auto insurance costs rose 20.3% from December 2022 to December 2023, according to the Bureau of Labor Statistics' (BLS) consumer price index (CPI) report. It's the biggest jump since 1976 and the 16th consecutive month of annual gains exceeding 10%.

While prices of used vehicles have decreased since the peak during the coronavirus pandemic-era supply-chain meltdown, the BLS report showed an increase of 0.5% in used car and truck prices in December 2023 after a 1.6% increase in November 2023. This increase was among the main causes of an acceleration in the inflation rate. The Consumer Price Index (CPI) increased by 0.3% in December after rising 0.1% in November.

Overall, used vehicle prices are still up 38% from the end of 2019, before the pandemic, according to the Manheim Index.

Meanwhile, a ValuePenguin report, “State of Auto Insurance in 2024," shows that consumers are not likely to find relief from rising personal auto insurance costs in 2024. With the average annual cost of auto insurance in the U.S. at $1,984, ValuePenguin projects that rates will increase by 12.6% this year.

Michigan is the state with the highest auto insurance rates in the country, at an average of $386 per month—134% higher than the national average—which is largely thanks to the state's personal injury protection coverage requirements. Florida at $249 per month and Nevada at $247 are the second and third most expensive states for car insurance. Nevada is projected to have the largest increase in auto insurance prices in 2024, with a 28% increase.

The cheapest states for auto insurance are Maine at $92 a month, New Hampshire at $96, and Idaho at $102.

“For insurance companies, one of the biggest causes for increased costs was natural disasters—these included severe hail in Texas, Colorado and Missouri, plus major windstorms in states like Georgia and Alabama," the ValuePenguin report said. “And while inflation slowed in 2023, cars continue to be more expensive to repair or replace. The used car market exploded after the pandemic when new car production slowed down, which in turn drove up the prices for parts—increasing repair costs."

Car theft rates have continued to rise since 2022, the report noted, with Kia and Hyundai models especially targeted in vulnerabilities highlighted by a viral TikTok trend. And while catalytic converter thefts have decreased since 2022, the instances of thefts are still 700% higher than they were in 2019.

2024 will also see an increase in electric vehicle (EV) sales, which rose almost 50% in 2023 as prices fell on the emerging technology. Insurance prices for EVs will become more affordable this year, ValuePenguin predicts, and will cost about 23% more than gas-powered cars to insure.

Thankfully, some signs are beginning to point to an end in sight for the hard market. Because of the premium growth, Swiss Re recently forecasted that personal lines—led by personal auto—will see its combined ratio drastically improve despite years of inflation and severe weather.

Swiss Re also expects loss severities to ease as “average inflation declines to our forecast [of] 2.7% in 2024 and 2.4% in 2025," the report said. “This sets the stage for improved underwriting results, as rate gains outpace claims costs." 

Nevertheless, consumers shouldn't expect to see any relative rate relief until 2025, Swiss Re noted. 

AnneMarie McPherson Spears is IA news editor.

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Wednesday, January 31, 2024
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