High-Tech Features Drive Up Car Insurance Costs

The gee-whiz gadgets on new cars - the backup cameras, the large touch screen controls, the blind-spot monitoring - make us all feel a little safer about navigating the roads.

But high-tech, advanced safety features come at a fairly steep price, so they're driving up car insurance rates, too."If they're damaged, they're much more expensive to repair," said James Lynch, chief actuary for the Insurance Information Institute."You can't just go to a shop and pick up a part that you can jerry-rig on."

Fixing a bumper isn't the same old job. Repairing a bumper on an entry-level luxury car, for example, can cost about $3,550 for a 2016 model for parts and labor, compared with about $1,845 for a 2014 model, according to data from Liberty Mutual Insurance.

Why? The 2016 model has a distance sensor; the 2014 model does not. Parts are 130 percent higher and labor is 18 percent higher."Increasingly, simple, small repairs can now be much more costly and complex to do," said Maxime Rieman, product manager for insurance at www.valuepenguin.com, a personal finance research firm with a website that can help consumers select insurance plans.

Consumers often don't think about the cost of insurance when they're shopping around for a new car - or a newer used car, such as one of the many 2015 models that will come off lease in 2018. But they should plan for higher insurance expenses relating to some advanced safety features and other factors.

"While it's improving safety, it's also increasing premiums on policies," said Todd Kozikowski, co-founder and chief revenue officer for Clearsurance, a crowdsourced review and ratings tool for insurance.

Just take a quick glance at where some sensors are placed. They're located on bumpers and side mirrors, spots that are easily hit - either in a significant accident or some minor fender benders.

The car payment is one part of the financial decision, but car insurance is another. So consumer experts advise reviewing insurance costs before buying a car, as well as comparing insurance premiums for different makes and models.

Kiplinger's Personal Finance magazine notes in a February report that consumers may even want to shop around for car insurance when their lives change, such as when they marry or get a new job.

Car insurance rates are likely to rise in 2018 across the country, according to industry experts. The consumer price index for auto insurance jumped up 25.9 percent - the largest five-year increase - from early 2012 through early 2017, according to www.valuepenguin.com.During the same time, the overall consumer price index rose by 6.7 percent. Nationwide, the average cost of auto insurance has gone up from $915 in 2015 to $980 in 2016, according to the Insurance Information Institute.

By 2017, though, the average cost of auto insurance was $1,060. It's expected to climb to $1,150 in 2018.

Michigan is notorious for its high car insurance rates given its unique no-fault system. Michigan ranks as the most expensive state for car insurance with an average of $2,394, according to rankings by www.insure.com.

To be sure, insurance premiums are going up across the country for a variety of reasons other than expensive auto parts. The Insurance Information Institute also blames higher rates on distracted driving, more drivers on the road during the economic recovery, faster driving and, in some states, legalized marijuana.

The more people are working, the more they're driving, the more likely they are to get into an accident.

The average age of vehicles on the road is 11.6 years. So many people who trade up to a new vehicle aren't even considering how new technology might drive up their insurance bills.

"You would like to think that all this additional technology would reduce cost," said Karl Brauer, executive publisher of Cox Automotive Inc. brands including car-shopping website Autotrader and researcher Kelley Blue Book.

But Brauer, who visited the Detroit auto show last week, said insurers still need to evaluate how consumers are using new technology and what could be leading to higher claims.

For example, he said, the introduction of anti-lock brakes in the 1980s didn't necessarily reduce accidents initially, as some drivers tended to drive more aggressively because they were banking that antilock brakes would prevent an accident.

Right now, he said, distracted driving from texting, cell phone usage and other sources is outweighing some benefits of newer safety features. Drivers who aren't paying attention don't react quickly even when alerted to change course by advanced safety equipment.

"Ultimately, you will see a reduction with accidents," Brauer said. So while forward collision warning systems, for example, can scan the road ahead and alert the driver to take action to avoid an accident, repairing such systems after an accident will drive up the severity of collision claims by about 2 percent, said Matt Moore, senior vice president of the Highway Loss Data Institute at the Insurance Institute for Highway Safety.

The complexity of the repairs goes up in part because sensors are mounted in the front bumper and must be repaired and may need to be recalibrated after an accident.

"The insurance industry is very focused on the repair costs associated with these new technologies," Moore said.

"When the reduction in the crash risk associated with any advanced driver assistance system is greater than the increased repair costs then insurance premiums will likely go down," Moore said.

Backup cameras, for example, will be required on most new vehicles beginning May 1. Most automakers have already begun putting backup cameras on new vehicles as standard.

Rear cameras - introduced on model year 2002 vehicles - are expected to be on more than half of registered vehicles in 2021, according to the Highway Loss Data Institute.

It will take decades for most registered cars on the road to be equipped with rear cameras, rear parking sensors, forward collision warning, blind spot monitoring and lane departure warning, as well as automatic braking and adaptive headlights.

Ray Fisher, president of the Automotive Service Association of Michigan in Lansing, which represents repair professionals, said some repair costs are higher but the benefits overall may outweigh those costs.

"Like anything else, there's a cost of having a camera there. And it's going to be an added cost when there's an accident," he said.

But standard backup cameras can prevent injuries and save lives when a driver might not see a small child when backing up.

It's likely that many advanced safety features, in the long run, can keep people from being injured, he said. So the higher repair or replacement costs associated with safety features in the grand scheme of things would be relative.

"I think the good will outweigh the bad," Fisher said.