Unless you’re an insurance nerd—and hey, we totally support that—chances are you don’t spend much time thinking about your car insurance until your policy renewal comes up. At that point, you’ll probably pay attention if your premiums have gone up.
If you’re questioning the rise in car insurance rates, you’re definitely not alone. Bankrate reports that the average cost of car insurance nationwide rose roughly 14% between 2022 and 2023. And no insurance provider is immune, these increases impact the entire car insurance industry.
At Lemonade Car, we’re big believers in both fair pricing and transparency. Let’s take a spin through the main factors causing higher car insurance premiums and what you can do to help minimize the impact on your wallet.
What car insurance rating factors are out of my control?
When car insurance companies price policies, they need to calculate how much they might need to pay out for car repairs or replacement, medical costs, liability, and even legal fees in the case of a covered incident.
Even if you’re a safe driver who never files claims, a lot can contribute to your risk as a driver that you can’t necessarily control—like if you live in a zip code that’s more prone to car theft, or if there’s heavier traffic on your daily commute.
These rating factors can be frustrating, but it’s nothing personal. Let’s look at some of these factors so you can understand what they are and why they impact your premium.
Inflation can drive up the costs of everything over time—from labor to car parts—which also drives up insurance premiums.
For example, inflation can lead to higher wages for skilled professionals, like certified car technicians and healthcare workers, which can increase the cost of providing services related to car accidents.
Economic inflation can also impact the value of new and used cars (and individual parts). So if your car is damaged in a covered incident, it could cost your insurer more to repair the damage or replace it.
Increasing repair costs
Car repair costs have been on the rise in recent years due to a number of factors, including:
- The increasing complexity of modern cars requires more specialized tools and knowledge to repair.
- The cost of replacement parts has increased, driven in part by advancements in technology and materials used in car manufacturing.
- Higher labor costs and a shortage of skilled technicians also contribute to higher repair bills (and potentially longer wait times for repairs too).
As supply chain costs increase, so will the price tag to repair or replace your car if it’s damaged in a covered incident, which may be reflected in your insurance pricing.
Higher medical expenses
Advancements in medical technology and the rising cost of prescription drugs have led to a steady increase in medical costs in recent years. When it comes to auto insurance, medical costs are a significant contributor to rising premiums.
When someone gets injured in a car accident, for example, their medical expenses can be substantial. So as medical costs continue to rise, auto insurance rates do too, because these costs often pass on to insurance companies—especially as more states require insurers to offer drivers personal injury protection (PIP) and/or medical payments coverage (MedPay).
Rise in natural disaster frequency and severity
Climate change has led to more frequent and severe weather events—like hurricanes, floods, and wildfires—causing extensive damage to vehicles, from water damage to hail damage.
These events can result in more frequent (and costly) repairs, and even total loss. Insurance companies must factor in the increased risk of weather-related damage when setting rates, which contributes to the overall rise in insurance premiums.
More drivers returning to office life
Leaving your WFH setup and heading on your daily commute to the office again may be a welcome change. But more people returning to their office routine means more cars on the road, which comes with an uptick in the frequency of car accidents (and car insurance claims).
Car insurance premiums are on the rise to keep up with the increasing number—and severity—of claims filed by drivers. It also accounts for the rise in miles that drivers are spending behind the wheel, which increases the likelihood of an accident.
More uninsured drivers and distracted drivers on the road
About 1 in 8 motorists driving in the US are uninsured. This means there are many drivers on the roads who could leave other drivers and passengers with expensive medical bills and repair costs if they cause an accident. If you include uninsured motorist coverage on your policy and are involved in a covered incident, these expenses could be absorbed by your insurer.
Also, distracted drivers are statistically more likely to cause accidents. Roughly 15% of car crashes in 2019 were due to distracted driving, and nearly 80% of car collisions involve some form of distraction that occurred three seconds before the crash. It’s quite possible that the prevalence of unsafe driving habits—like texting while driving and drowsy driving—are leading to more accidents and higher associated costs for insurance companies, which ultimately means higher rates for drivers.
What car insurance rating factors are within my control?
There are several factors that can impact your insurance costs—for better or worse—including:
- Your driving record—like new speeding tickets, other traffic violations, or car accidents
- Your insurance claims history, including whether or not you were at fault
- Your driving behaviors
- Where you live
- Your car’s make, model, and model year
- Adding or removing a car on your policy
- Adding or removing drivers on your policy, especially a teenage driver
- Updating your car insurance coverages (like adding collision or comprehensive coverage)
- Adjusting your coverage limits and deductibles
How can I get the best car insurance rates?
When you get behind the wheel, you should feel confident knowing that you’re getting the right insurance coverages at a fair price. As car insurance rates increase state- and nationwide, here are some of the many ways you can help lower your premium:
- Compare insurance quotes: Shop around for a policy that’s the best fit for you. And if you want to compare quotes like a pro, make sure to include the same coverages, deductibles, and limits on each.
- Bundle discounts: Insurance doesn’t stop with your car. If you want to protect your home—or your four-legged family members—bundling insurance policies is a great way to score discounts. For example, you’ll be eligible for a discount on each of your Lemonade policies when you bundle your car insurance with any combination of our other insurance products—like renters, homeowners, and pet insurance.
- Drive safely: Some car insurance providers offer discounts or savings for drivers with safe driving habits. At Lemonade Car, the way you drive actually matters, so we reward safe, low-mileage drivers with savings.
Before we drive off…
It’s frustrating when you can’t control certain external factors that impact your car insurance premium.
But you do have the power to choose an insurance company that keeps your safety and budget top of mind. At Lemonade Car, we put our customers first, offering top-of-the-line coverage and fair prices.
Click below to get your quote started. It’s fast, free, and dare we say it’s even kind of fun.
A few quick words, because we <3 our lawyers: This post is general in nature, and any statement in it doesn’t alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade, which differ according to your state of residence. You’re encouraged to discuss your specific circumstances with your own professional advisors. The purpose of this post is merely to provide you with info and insights you can use to make such discussions more productive! Naturally, all comments by, or references to, third parties represent their own views, and Lemonade assumes no responsibility for them. Coverage may not be available in all states.