New report projects 22% increase in car insurance costs after 15% spike in first half of 2024
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Car insurance rates have soared in post-COVID-19 years, and despite many insurance industry experts predicting slower rate hikes in 2024, data from the first half of the year shows a 15% increase in full-coverage premiums. Insurify's data science team projects a total 22% increase in 2024.
Rate increases in 2024 are largely a continuation of hikes in 2023, a year that saw full-coverage premiums rise by 24% in response to insurers' record underwriting losses (
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. These costs strain insurers' budgets as they pay out more than they earn in profit.
Additionally, legislative changes in states like
Insurify's data science team analyzed average car insurance rates across
Key Takeaways
* The cost of full-coverage car insurance increased by 15% in the first half of the year, despite industry expert predictions that rate hikes could slow in 2024. The average annual full-coverage premium now costs
* Insurify predicts
*
* Vehicle maintenance and repair costs have increased by nearly 38% over the past five years, according to the
* Increasingly severe and frequent weather events are driving up auto insurance premiums. Hail-related auto claims represented 11.8% of all comprehensive claims in 2023, up from 9% in 2020, according to
Car Insurance Costs Surpassed
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The average annual cost of full coverage hit
A full-coverage policy includes comprehensive and collision coverage in addition to liability coverage. While most states require liability coverage, comprehensive and collision coverage are optional but provide drivers with greater financial protection for their own vehicles.
Each state has its own insurance regulations and risk factors, so premiums vary across the
The 10 Most Expensive States for
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Some states with the most expensive full coverage in the
Key Factors Behind High Car Insurance Rates in Top States
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Three of the 10 most expensive states for car insurance—Florida,
Other states with sky-high insurance rates, like
Vehicle theft rates, traffic congestion from high population density, and an increase in car accidents also contribute to higher rates. Insurify analyzed the 10 most expensive states for car insurance to identify the hidden factors affecting policyholders.
1.
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* Average annual cost of full coverage:
* Percent higher than the
* Projected average rate increase in 2024: 41%
New Maryland legislation, effective
2.
* Average annual cost of full coverage:
* Percent higher than the
* Projected average rate increase in 2024: 38%
Full-coverage rates in
Insurers consider fraud risk when setting rates. Weather-related damages from an active 2024 hurricane season are also a risk insurers have to price in.
A 2023
3.
* Average annual cost of full coverage:
* Percent higher than the
* Projected average rate increase in 2024: 4%
4.
* Average annual cost of full coverage:
* Percent higher than the
* Projected average rate increase in 2024: 20%
5.
* Average annual cost of full coverage:
* Percent higher than the
* Projected average rate increase in 2024: 18%
Over the past two years,
Despite attempts to reform the state's insurance regulations,
6.
* Average annual cost of full coverage:
* Percent higher than the
* Projected average rate increase in 2024: 23%
7.
* Average annual cost of full coverage:
* Percent higher than the
* Projected average rate increase in 2024: 13%
In one bright spot for policyholders, the
8.
* Average annual cost of full coverage:
* Percent higher than the
* Projected average rate increase in 2024: 17%
Drivers in the
Premium increases may soon slow in D.C. The D.C. legislature passed a new law requiring home and auto insurers to file for prior approval to raise rates. Excessive hikes require notice and an opportunity for a hearing. Previously, D.C. had a file-and-use system, meaning insurers could raise rates immediately after filing with the
9.
* Average annual cost of full coverage:
* Percent higher than the
* Projected average rate increase in 2024: 8%
10.
* Average annual cost of full coverage:
* Percent higher than the
* Projected average rate increase in 2024: 24%
On
States Where Car Insurance Is Rising Fastest in 2024
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The cost of full coverage across the
The reasons behind these extreme increases vary and compound. From hail to hurricanes, shifting weather patterns due to climate change are driving up claims and, consequently, premiums in some states. Others are seeing higher rates of car thefts or the effects of legislative changes.
Severe Weather and Rising Theft Rates Drive Up Auto Insurance Costs
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Severe convective storms also hit
Car thefts drive up premiums, too.
California Is Now Playing Catch-Up
"During COVID-19 shutdowns, states like
Additionally,
This means
Insurers Face Challenges in
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As more insurers leave the state, the DOI may approve additional rate increases to keep companies in the market.
Climate Change Plays a Growing Role in Auto Insurance Rate Setting
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Climate risk has historically affected homeowners more than auto insurance—but growing damages from weather events, which comprehensive car insurance often covers, are changing how insurers set rates.
"I think climate risk will likely start to play a role in new areas. As we experience tornadoes, hail, and flooding in places where they weren't necessarily a major threat before, the increased frequency and severity of these events will need to be considered in pricing," said
Climate events that cause
Rising Weather-Related Claims Drive Up Auto Insurance Premiums
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During Hurricane Ian's peak days, Sept. 25–30, 2022, nearly 52% of
Severe thunderstorms cause less damage as single events but accounted for 70% of all insured natural catastrophe losses in the first half of 2023, causing
Hailstorms are particularly destructive. Auto losses from a single hailstorm could exceed
Insurers raise premiums to cover more expensive weather-related claims, but they're also paying for reinsurance—essentially insurance for insurers. Reinsurance companies spread out the cost of catastrophic losses and raise insurers' rates in response to increasingly severe and frequent climate events.
"Consumers can expect to see increased reinsurance costs passed along to them," said Stella.
Drivers in hurricane-prone areas may be especially likely to see rising reinsurance rates affect their premiums. The
Newer Cars With More Expensive Repairs Put Upward Pressure on Insurance Rates
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New vehicles often have thousands of fragile semiconductor chips to support advanced features like collision, lane-departure, and blind-spot warnings. Safety technologies can help drivers avoid crashes and accident-related premium hikes but are also expensive to repair.
Vehicle maintenance and repair costs have increased by nearly 38% over the past five years, according to the BLS CPI.
Advanced driver-assistance systems, or ADAS, can add up to 37.6% to the total repair cost after an accident,
EVs pose an additional challenge. They take an average of 5.8 days longer and cost 46.9% more to repair than gas-powered cars, with an average repair cost of
Mechanic labor hours have grown by 40% per claim over the last decade as technologies in newer models become increasingly complex. Finding an auto mechanic without a backlog to perform that labor can be difficult. The
As new vehicle prices have risen and inflation has strained Americans' finances, drivers are holding onto their cars for longer. The average
Though most insurers offer new vehicle discounts because the cars are more reliable and safer in accidents, insurance is cheaper for older vehicles. Full coverage for a 2011–2012 model year
The 2024
Auto Insurers Push Telematics for Relief From Premium Hikes
Drivers facing premium hikes may look to insurance discounts to lower their costs. Most insurers offer numerous ways to save, including bundling home and auto insurance, taking defensive driving courses, and achieving a certain number of years without an at-fault accident or other moving violation.
But insurance companies are increasingly interested in pricing risks based on policyholders' driving behaviors rather than factors like gender, place of residence, or credit-based insurance scores, says Stella. Telematics insurance programs give insurers that ability.
Telematics-based insurance tracks driver behavior through smartphone apps or plug-in devices. Insurers use this driving data to determine premiums, reducing the cost for cautious drivers who follow traffic laws and increasing it for behaviors like hard braking, speeding, and rapid acceleration.
Telematics insurance savings vary. Progressive's Snapshot telematics program saves drivers an average of
"It remains to be seen how much premiums will be reduced for the safest drivers, but there doesn't seem to be doubt [from insurers] that they will be," Stella said. "Insurers also see opportunities to use telematics data to make driving safer for everyone on the road. Alerting riskier drivers to their unsafe behaviors, for instance, may reduce instances of those behaviors—particularly if there are incentives to drive more safely."
Data shows the benefits of telematics for road safety and insurance rates. By participating in a telematics program, the least-safe drivers decreased distracted driving behaviors by an average of 20% and hard braking by 9%, reducing estimated bodily injury claims by 5.5%, according to a Cambridge Mobile Telematics study.
Catastrophic Losses and Expensive Repairs Continue to Strain Insurers and Drivers
Despite signs of market stabilization at the beginning of the year, premium increases have continued in 2024. By the end of the year, Insurify's data science team expects a 22% year-over-year increase in full-coverage rates, bringing the average annual cost to
Rising vehicle repair costs and more complicated and expensive fixes for newer cars with ADAS are significant drivers of rising premiums.
Drivers in states with frequent heavy storms, hail, hurricanes, and wildfires—an increasingly large portion of the country—will likely see the effect of climate catastrophes reflected in their premiums. As reinsurance companies raise rates, auto insurers pass some of that cost to policyholders.
But good news may be on the horizon for some drivers.
"Insurers implemented higher rate increases to account for changes in the frequency and severity of auto losses. The COVID-19 pandemic and following inflation, especially in the price of vehicle maintenance and repairs, along with changes in driving behaviors, led to new loss trends that increased the difficulty of rate setting," said Stella.
"Some insurers have started making downward adjustments in areas where they've found opportunities to operate profitably while charging lower rates," she said. "Generally, consumers will continue to see rates rise with inflation, or in areas where traffic accidents are increasing, but in some states, they could see premiums decrease a little again."
In the meantime, drivers who saw their premiums rise can take steps to lower their insurance costs. Comparing rates with multiple insurance companies can help drivers save hundreds of dollars annually on comparable coverage.
Insurers also offer discounts for accident-free drivers, military members and their families, certain vehicle safety features, multi-vehicle policies, and more. Raising deductibles can bring premiums down, and telematics programs can further reduce costs for cautious drivers.
Methodology
Insurify's data scientists examined more than 97 million rates in its proprietary database, quoted via integrations with partnering insurance companies. Driver applications originate from all 50 states and
The premiums in this report reflect the median insurance cost for drivers between the ages of 20 and 70 with clean driving records and average or better credit, unless otherwise noted. Yearly prices in this report are two-year rolling medians to manage extreme market volatility over the past few years.
Liability-only premiums correspond to policies with bodily injury limits between state-minimum requirements and
This story was produced by Insurify and reviewed and distributed by Stacker.
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