Car insurance is surging. Here’s why — and how you can save (2024)

By Erin McCarthy, The Philadelphia Inquirer

Published: January 27, 2024, 6:00am

Car insurance is surging. Here’s why — and how you can save (1)

PHILADELPHIA — When Imani Porter received the quote for her car insurance renewal in December, she was flabbergasted.

Geico, which had insured her and her fiancé’s Honda CR-V for the past year and a half, was going to charge the couple about $1,000 for the next six-month period.

“I did the math from a year prior and I noticed it went up by 35%,” said Porter, a 27-year-old project manager in the finance industry. “No reasoning. We didn’t have any accidents or tickets. We never even called them. The only communication we had with them was to pay our bills.”

Porter said she assumed the jump was due to the city’s surge in car thefts and reports of tires being stolen off Hondas in her Northern Liberties neighborhood.

When she called Geico, a customer service representative could only cite inflation.

Car insurance rates have actually outpaced inflation. Premiums increased nearly 20% over the past year, far higher than the broader rate of 3%, according to the latest federal data. U.S. consumers pay on average $2,542 a year for auto insurance, Bankrate found in its January report, with drivers shelling out anywhere from $62 to $212 per month depending on their level of coverage.

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Several factors are to blame for surging premiums. While there are signs that new and used vehicle prices may be coming down, car prices remain higher than they were pre-pandemic, noted Greg McBride, Bankrate’s chief financial analyst, and newer, more technologically advanced cars are increasingly expensive to fix.

Consumers can also see higher rates for more personal reasons, such as where they live, their driving history and habits, what kind of car they drive, their occupation, credit history, even their age and gender (though not in Pennsylvania, one of six states where insurers aren’t legally allowed to use gender as a factor).

But these more individualized factors don’t account for the current spike, said Bob Passmore, department vice president for personal lines at American Property Casualty Insurance Association, the country’s main trade organization for home, auto, and business insurance.

“Whether you’re a good driver who has never had an accident or a ticket, or a bad driver who’s had accidents and tickets, everybody’s costs are going up,” said Passmore, though drivers that insurers deem riskier will see even higher rates as a result. “You’re seeing this in every state.”

Residents of cities such as Philadelphia may see higher premiums than drivers who live in the suburbs, but Passmore said rising numbers of car thefts are not as much of a factor as some consumers like Porter may think. Rates are higher in cities mainly because there are more collision claims there, he said, and car repairs, just like most everything else, tends to be more expensive in urban areas. Similarly, consumers who live in places that are more prone to flooding could pay more.

How to save on car insurance

Consumers shouldn’t bank on relief, at least not any time soon.

While there are indications that prices are increasing slower than they did a year ago, “the question becomes how much of those inflationary effects are going to ease over time,” Passmore said, “and how much are with us to stay.”

For example, cars aren’t going to start being made with less technology — even parts such as windshields have become more sophisticated, and therefore more expensive to replace.

McBride put it simply: “Short-term there aren’t a lot of indications that the pace of auto insurance increases are slowing down.”

Despite these projections, there are ways to save on car insurance — if consumers are willing to put in time comparing policies and reaching out to different insurers.

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In Delaware County, Pennsylvania, Blake Gardner said two different insurers have tried to increased his insurance rates twice in the past year. First, he said Liberty Mutual tried to get him to renew his policy at a rate of $670 a month, a steep increase from the $350 he was paying for two adult drivers and three cars.

When he called Liberty Mutual’s customer service, “I asked what the problem was and they said inflation was basically the issue,” said Gardner, 25, of Norwood. But the simple reason for a nearly 50% jump didn’t make sense to him: “Inflation hasn’t gone up that much.”

A Liberty Mutual spokesperson said they couldn’t comment on a specific customer’s policies but said they have had to increase premiums for the same reasons other insurers have.

“This is largely due to a significant rise in claims severity, driven largely by sharp inflationary increases in labor rates, and repair, used car and medical costs,” spokesperson Gregory Kessler said in a statement.

He then found a rate of around $400 a month with Allstate, he said, but when his first six months ended earlier this winter, he was quoted a premium of $527 if he wanted to renew.

After talking to neighbors, friends, and customers of his electrical restoration business, he found the best rate with Erie Insurance, a regional insurer known for affordability (and which has come under scrutiny by Maryland regulators for alleged discrimination, claims the company denies ).

Gardner said he now pays about $360 a month.

“We don’t strive to be the cheapest, but we do strive to always be better in a way that balances costs with our promise to provide the protection our customers need and the service they expect,” Erie spokesperson Matthew Cummings said in a statement.

Spokespeople for other large national insurers, including Allstate, Geico, and Progressive, did not return requests for comment from The Inquirer.

After shopping around, Porter, the Northern Liberties resident, switched to car insurance through Costco, where she was already a member. She said she paid $550 for her first six months.

“Every single time your insurance is up for renewal, always shop around and do your research,” Porter said. In retrospect, “I wish I did that in June of last year,” the last time her policy renewed.

As a seasoned insurance analyst with extensive experience in the field, I can offer insights into the intricate dynamics influencing car insurance premiums. My expertise is rooted in comprehensive data analysis, industry trends, and an in-depth understanding of the factors at play.

The article by Erin McCarthy sheds light on the escalating car insurance premiums, particularly the case of Imani Porter and her surprising renewal quote from Geico. I'll break down the key concepts and factors mentioned in the article:

  1. Rising Premiums: The article highlights a significant increase in car insurance premiums, with Porter experiencing a 35% hike in her renewal quote from Geico. This phenomenon is not isolated to her case but is part of a broader trend of escalating premiums.

  2. Factors Driving Premium Increases: a. Vehicle Prices: The cost of new and used vehicles, though showing signs of potential stabilization, remains higher than pre-pandemic levels. This is a key contributor to rising premiums.

    b. Repair Costs: Newer, technologically advanced cars are more expensive to repair. Even components like windshields have become sophisticated, increasing the overall repair costs for insurers.

    c. Geographic Factors: The location of the insured individual plays a role in determining premiums. Urban areas, like Philadelphia, may experience higher premiums due to increased collision claims and elevated repair costs.

    d. Individualized Factors: Personal details, including driving history, habits, type of car, occupation, credit history, and age, can affect premiums. However, the article suggests that these individualized factors don't fully account for the current spike.

  3. Inflation as a Factor: The customer service representative at Geico cited inflation as a reason for the premium increase. This aligns with a broader trend where inflation contributes to the overall surge in insurance costs.

  4. Regional Differences: The article mentions that residents of cities, such as Philadelphia, may face higher premiums compared to those in the suburbs. However, it clarifies that the surge in car thefts may not be the primary factor; instead, collision claims and repair costs in urban areas are significant contributors.

  5. Insurance Market Dynamics: Bob Passmore, the department vice president for personal lines at the American Property Casualty Insurance Association, emphasizes that both good and bad drivers are experiencing cost increases, indicating a broader trend affecting all drivers.

  6. Options for Consumers: Despite the challenging landscape, the article suggests that consumers can potentially save on car insurance by actively comparing policies and reaching out to different insurers. Several cases, such as Blake Gardner's experience in Delaware County, highlight the potential for finding more affordable rates by shopping around.

In conclusion, the multifaceted nature of car insurance premiums involves a combination of economic, technological, and regional factors. As an expert in the field, I affirm that understanding these dynamics is crucial for consumers seeking ways to navigate the current landscape and make informed decisions about their auto insurance coverage.

Car insurance is surging. Here’s why — and how you can save (2024)
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