The Outlook for Car Insurance in 2024

Key points

  • Experts expect car insurance rates to continue to rise in 2024.
  • Replacement costs will continue to affect future car insurance rates as insurers adjust to a 45% increase in costs from 2020 to 2023.
  • Increases in natural disasters, medical claims costs, and vehicle theft will also contribute to higher car insurance premiums.

Car insurance rates are expected to continue to rise, so prepare for your next renewal bill. Increases in car theft, climate disasters, inflation and expensive car accidents are driving higher car insurance costs in 2024. Learn about the main factors driving up car insurance costs and how to find the best car insurance in 2024.

Car insurance rates will continue to rise in 2024

Consumers shopping for the best auto insurance can expect higher prices in 2024, says Mark Friedlander, director of corporate communications at the Insurance Information Institute (Triple-I).

Auto insurance rates are expected to continue to rise in 2024 due to more expensive repairs, driven by parts shortages and higher labor costs, as well as low vehicle inventories, which generate higher replacement costs for overall cars.

Mark Friedlander, Triple-I

Friedlander went on to highlight parts and replacements as another pain point for the auto industry. From 2020 to 2023, replacement costs rose an average of 45% cumulatively, while inflation for the entire US economy rose 15% over the same time frame.

Previous losses will lead to higher premiums, he continued. The US auto insurance industry is expected to post a significant underwriting loss in 2023 with a combined ratio of 110.5, meaning they pay out $1.10 for every dollar collected in premiums.

Expected rate increases follow cost trends in 2023.

Car insurance rates increased by 18.9% compared to the previous year according to statistics from the Labor Office. As Friedlander noted, replacement and repair costs drive that increase, but they’re not the only factors at play. Prices are also rising due to:

  • Higher crash severity. Although the number of crashes has been on the decline since 2021, speeding deaths have reached a 14-year high. Accidents at higher speeds are often more serious and result in more litigation.
  • Bad weather. Tropical cyclones cost insurance companies millions of dollars in losses, and to recoup these losses, insurance companies must increase premiums in the coming years.
  • Increased number of car thefts. Vehicle theft rates hit near-record highs in 2022, with vehicle thefts up 7% year-over-year, according to the National Insurance Crime Bureau, and the trend continued in the first half of 2023. More thefts mean more comprehensive insurance claims for companies, losing money they earn from premiums.
  • Higher medical expenses. Medical costs are also on the rise. For auto insurers, this means higher payouts for bodily injury claims as well as other injury-related claims, such as those filed under MedPai or a personal injury protection (PIP) policy.

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Auto theft is reaching near record levels

Nearly 500,000 vehicles were reported stolen in the US in the first half of 2023, an increase of more than 2% year-over-year, according to the latest data from the National Insurance Crime Bureau (NICB).

Some states experienced significantly larger increases compared to the previous year: Illinois had a 38% increase, followed by New York (20%) and Ohio (15%).

Overall, there were 1,001,967 vehicle thefts nationwide in 2022, which is about two stolen vehicles every minute, up from 937,976 in 2021, said Joseph Brenkle, director of public affairs for the NICB. As the trend continues, more car thefts mean more comprehensive claims, and these losses for insurance companies translate into higher premiums for customers.

Accident rates are falling as insurers adjust to past trends

The National Highway Traffic Safety Administration (NHTSA) estimated that the number of traffic fatalities fell by 3.3% during the first half of 2023, compared to the first half of 2022. That is the fifth consecutive quarter of decline, which is a welcome reduction.

However, a 19% increase between 2019 and 2020 has left many insurers struggling with increased claims costs.

A key factor in determining the underwriting benefit is the severity of the accident. Since the pandemic began in 2020, the cost of casualty losses has outstripped premiums collected, leading many insurers to raise rates multiple times to cover losses. “We’re starting to see premiums catch up with loss costs,” Friedlander said.

Repair costs increase claims

New cars come with more technologically advanced features, which increases repair costs and subsequently insurance premiums. According to AAA, many new cars have advanced driver assistance systems (ADAS), which include features such as:

  • Adaptive cruise control.
  • Adaptive headlights that control the vehicle.
  • Automatic emergency braking.
  • Automatic switching on and dimming of high beams.
  • Blind Spot Monitoring.
  • Forward Collision Warning.
  • Lane departure warning.
  • Help with lane maintenance.
  • Parking assistance/self parking.
  • Rear Cross Traffic Alert.

While these features make driving safer, they also increase repair costs, leading to more expensive claims and higher premiums to cover these claims.

Personal injury lawsuits are getting more expensive

A 2023 study published by the Property and Casualty Insurance Association of America (APCIA) found that the weighted costs of bodily injury claims increased by 40% between 2018 and 2022.

While the US experienced a slight downward trend in medical costs in early 2023, this is unlikely to have a positive impact on auto insurance rates for consumers. Medical costs started rising in August, we won’t know the true annual increase until the first quarter of the new year.

However, according to an analysis of health care coverage under the Affordable Care Act (ACA) by the Peterson Center for Health Care and KFF, the medical trend, which includes the increase in the price insurance companies pay for drugs and medical services, will increase by about 8% in 2024 This increase will not only lead to higher health care costs, but could potentially lead to higher car insurance costs as insurers pay more for claims.

However, medical cost inflation tells only one part of the story. The same APCIA report suggests that fatal motor vehicle accidents and abuse of the legal system also increase the overall cost of personal injury claims.

As the costs of personal injury claims rise, so do customer premiums, as insurers race to correct or prevent losses.

Climate change and natural disasters increase costs

Climate change and resulting natural disasters are wreaking havoc on the homeowners insurance industry, but the auto insurance industry has not and will not remain unscathed.

From 2020 to 2022, there were $20 billion worth of weather events in the US, meaning the events had total damages/costs of more than $1 billion, adjusted for the 2023 Consumer Price Index (CPI).

In contrast, from 2010 to 2019 there were only $13 billion worth of events: 6.7 from 2000 to 2009, 5.7 from 1990 to 1999, and 3.3 from 1980 to 1989. These events cost insurance companies billions of dollars because they have to pay home and auto insurance claims. From 2020 to 2022 alone, these events cost $456 billion.

For car insurance companies, climate change and natural disasters lead to comprehensive car insurance claims. This type of auto insurance helps policyholders cover damage from non-collision events such as hail, fire, flood, falling trees and other storm-related damage.

Evidence of the increase in weather-related claims can be seen in the latest data from the Insurance Information Institute (Triple-I), which shows a nearly 18% increase in hail claims from 2021 to 2022. Further analysis by State Farm found that the insurer faced a billion-dollar increase in brawl claims alone.

Insurers are raising rates to address past losses

In the first quarter of 2023, US private auto insurers had their worst direct loss ratio in more than 20 years, falling from 72.4% in the fourth quarter of 2022 to 76.2% by the end of March 2023.

This means that while the companies wrote $43.60 billion in direct premiums for private passenger auto liability, there were $32.70 billion in physical damage premiums, so the companies lost over three-quarters of customer premiums.

Unless replacement costs start to decline significantly, which is not currently forecast, we predict that personal car insurance will remain loss-making until 2025.

Mark Friedlander, Triple-I

To offset these losses, most companies raised their rates in the first quarter of 2023, so we can expect similar trends in 2024 as losses continue to mount.

Source: S&P Global Market Intelligence.

Finding the Best Car Insurance Companies in 2024

Car insurance rates will continue to rise in 2024, making it even more important to find the best car insurance company to meet your coverage needs. Here are some things you can do to find the best match.

  • Shop around. Get car insurance quotes from at least three different insurers. It can help you find the cheapest car insurance based on your needs and preferences.
  • Research each company. The cheapest rates do not always equal the best coverage. Before making the switch, check out car insurance reviews online and talk to friends, family and co-workers about their experiences.
  • Consider grouping. A home and car insurance package, or other types of coverage, such as renters, can unlock savings.
  • Check available discounts. Most insurers offer at least a few discounts on car insurance. Whether you’re staying with your existing insurer or considering a new provider, always ask about available discounts, which can lower your premiums.
  • Reevaluate your coverage needs. As time goes by, your car insurance needs may change. For example, you may find that it makes sense to add or drop coverage, such as collision insurance, based on your vehicle, risk factors and financial situation. The same can be true when it comes to increasing or decreasing your deductibles or coverage limits.

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