Unprecedented climate catastrophes are just one of the factors pressuring insurance companies to raise rates.
Car insurance has become more expensive in 2024, and the increases may not be over. A new study projects that by the end of the year, the average policy will cost 22% more than it did a year ago.
The number comes from Insurify, an insurance comparison shopping service. Data scientists from Insurify “examined more than 97 million rates in its proprietary database, quoted via integrations with partnering insurance companies” in all 50 states and the District of Columbia.
Insurify says the average cost of comprehensive car insurance increased 24% last year and could nearly match that increase this year.
“The average annual cost of full coverage hit $2,329 in June 2024, a 15% increase from $2,018 at the end of 2023. Drivers could see a total increase of 22% in 2024, with average premiums of $2,469 by the end of the year,” Insurify says.
Prices Rise, but Insurers aren’t Profiting
The price hikes come as insurance companies say they’re losing money.
“Insurer losses result from a combination of inflationary pressures — like the rising cost of vehicle repairs and the skyrocketing price of new cars — and unprecedented climate catastrophes that drive weather-related claims in states that haven’t historically seen as much of this type of damage,” the researchers write.
Insurance companies can’t raise rates without permission from state insurance commissions. Many state commissions didn’t approve multiple rate hikes at the height of the COVID-19 pandemic, as Americans drove less, giving insurance companies less data to justify rate changes to regulators.
Insurers have spent the time since making up for the pause. Accidents have also grown more expensive. Many of today’s cars have sophisticated camera, radar, and lidar-driven safety systems. Even a minor accident can require replacing or recalibrating them – a costly prospect.
According to the Bureau of Labor Statistics, repair costs have increased by 38% over the last five years.
More frequent, damaging storms have also cost insurers billions. One major company stopped serving Florida last year due to skyrocketing flood claims.
Prices vary Widely From State to State
State laws regulate insurance. Prices in one state can be very different than those in a neighboring state.
“Legislative changes in states like South Carolina and Maryland have increased insurers’ financial responsibility, leading them to charge higher premiums,” Insurify notes. “In California, which froze insurance rates during the COVID-19 pandemic, some insurers request double-digit hikes as they struggle to return to profitability, while others are exiting the state entirely.”
The company says, “California, Missouri, and Minnesota could see car insurance costs increase by more than 50% in 2024.”
Plus: Gasoline prices are lower than they were a year ago. Here’s why.
What you Can Do
If you’re not car shopping, Kelley Blue Book recommends that drivers shop for insurance every six months. There’s little you can do to control your insurance costs, but it makes sense to explore lower prices and create competition for your business.
Many insurance companies now offer discount programs for drivers who install a monitoring app on their cell phones. The apps report on how often drivers accelerate and brake hard and let drivers note when they weren’t the ones driving. You give up some privacy to install a monitoring app, but you can save money. Many insurers let drivers use the app for six months, then qualify for a discount for a year or more afterward.
If you are car shopping, get insurance quotes on your future car before you put down the first dollar. In a world where insurance costs increase by nearly 25% a year, some shoppers find that they can afford the car they want but not the insurance.
