Current:Home > NewsInflation may be cooling, but car insurance rates are revving up. Here's why.-InfoLens
Inflation may be cooling, but car insurance rates are revving up. Here's why.
View Date:2024-12-23 14:42:16
Kayla Mills spent most of this year driving a Honda HRV, but last month she decided to return the vehicle to the dealership. Her reason? The $520 a month car insurance bill no longer fit her budget.
"I can pay it, but being able to afford it while also affording the rising costs of everything else going on, I made an executive decision to let go of my car," the Massachusetts resident said.
Mills isn't the only one feeling the pinch of car insurance payments. Not only has overall inflation grew 3% in June compared with a year ago, but auto insurance has gone up a whopping 19.5%, according to the most recent Consumer Price Index data. The national average for full coverage car insurance is nearly $2,300 a year as of July, or $190 a month, according to data from personal finance website Bankrate.
But it wasn't the increase alone that bothered Mills. She said she ultimately returned the HRV because her insurance increased without explanation from her provider. So what was the reason for the rate increase?
According to one insurance expert, there are three reasons why auto rates are going up, even if your own driving record hasn't changed.
Inflation hits car insurance
First, the cost insurance providers pay to repair vehicles after an accident — like mechanic hours and car parts — has increased more than 40%, said Dale Porfilio, chief insurance officer at the nonprofit Insurance Information Institute. Insurers are starting to pass more of those costs onto policyholders, he said.
"You also have the fact that people's behavior got riskier during the pandemic," Porfilio said. "So, you think about things like speeding, drunk driving, all those characteristics got worse during the pandemic — our own behavior got riskier."
The third reason insurance rates are climbing: Lawyers are increasingly involved in settling accident claims.
"In general, when you have increased attorney involvement, you actually end up with a higher payout from the insurance company, but a lower payout coming to the injured parties and the claims," Porfilio said.
Dent in summer car buying season
Car buying activity typically picks up during the spring and summer months, experts said, as customers like to stroll dealership lots in warmer weather. But rising auto insurance rates are starting to threaten what's typically a fruitful season for automakers.
Gas prices and regular maintenance on a vehicle — like getting the oil changed or the tires rotated — are also weighing down household budgets. A Bank of America survey from March found that Americans feel vehicle maintenance and loans are two of the top five most difficult household expenses to afford.
Drivers should expect auto insurance rates to continue climbing the rest of this year, Porfilio said, adding that although prices should stabilize in 2025, exactly when will vary from company to company.
- In:
- Inflation
- Auto Industry
Khristopher J. Brooks is a reporter for CBS MoneyWatch. He previously worked as a reporter for the Omaha World-Herald, Newsday and the Florida Times-Union. His reporting primarily focuses on the U.S. housing market, the business of sports and bankruptcy.
TwitterveryGood! (3)
Related
- ‘Emilia Pérez’ wouldn’t work without Karla Sofía Gascón. Now, she could make trans history
- Hit-and-run which injured Stanford Arab-Muslim student investigated as possible hate crime
- King Charles III will preside over Britain’s State Opening of Parliament, where pomp meets politics
- Kyle Richards tears up speaking about Mauricio Umansky split: 'Not my idea of my fairytale'
- GM recalling big pickups and SUVs because the rear wheels can lock up, increasing risk of a crash
- 7 bystanders wounded in shooting at Texas college homecoming party, sheriff’s office says
- Luis Diaz appeals for the release of his kidnapped father after scoring for Liverpool
- Ariana Madix reacts to ex Tom Sandoval getting booed at BravoCon: 'It's to be expected'
- Suspect in deadly 2023 Atlanta shooting is deemed not competent to stand trial
- Ryan Blaney earns 1st career NASCAR championship and gives Roger Penske back-to-back Cup titles
Ranking
- Incredible animal moments: Watch farmer miraculously revive ailing chick, doctor saves shelter dogs
- Tupac Shakur Way: Oakland street named in rapper's honor, 27 years after his death
- Who is the Vikings emergency QB? Depth chart murky after Cam Akers, Jaren Hall injuries
- Trial opens for ex-top Baltimore prosecutor charged with perjury tied to property purchases
- Watch as dust storm that caused 20-car pileup whips through central California
- Reinstated wide receiver Martavis Bryant to work out for Cowboys, per report
- Polish president to appoint new prime minister after opposition coalition’s election win
- Millions are watching people share childhood diaries on TikTok. Maybe that's a bad idea.
Recommendation
-
Mike Tyson is expected to honor late daughter during Jake Paul fight. Here's how.
-
QB changes ahead? 12 NFL teams that could be on track for new starters in 2024
-
‘Doc’ Antle of Netflix’s ‘Tiger King’ pleads guilty to wildlife trafficking and money laundering
-
The new Selma? Activists say under DeSantis Florida is 'ground zero' in civil rights fight
-
Lions find way to win, Bears in tough spot: Best (and worst) from NFL Week 10
-
32 things we learned in NFL Week 9: Not your average QB matchups
-
Horoscopes Today, November 4, 2023
-
Nobel Peace Prize laureate Narges Mohammadi goes on a hunger strike while imprisoned in Iran