Auto insurance rates are increasing in 2022. Here’s how to prepare. – Bankrate.com
Auto insurance rates are rarely, if ever, static; instead, rates fluctuate based on several factors and circumstances. Bankrate’s extensive research has revealed that, in 2022, the average cost of car insurance rates will probably rise for many drivers. Several major auto insurers, including Allstate, Progressive, Geico and State Farm, have rate increases that took effect in late 2021 or early 2022 in many states. Allstate and its subsidiaries, for example, have had 20 rate increases approved in 13 states since November 2021. S&P Global Market Intelligence reports that rate increases from the companies studied vary from around 3% to just under 12%.
Because car insurance is typically a required expense, premium increases can be surprising and financially challenging, especially for drivers who already pay higher-than-average rates due to insuring teens, having accidents or tickets on their records, or living in a high cost-of-living area. Bankrate explains why rates are likely to increase for many drivers, shows you how to prepare for a potential rate hike and lays out strategies you can use to help offset these increases.
Will auto insurance rates go up in 2022?
According to Steve Ellis, an Assistant Vice President and Claims Field Manager at Liberty Mutual,
“the overall cost of doing business is increasing for practically all companies in the U.S., including insurance companies. And because the ‘cost of doing business’ is part of the calculation of premiums, consumers can expect, in general, higher premiums in 2022.”
A number of economic and societal influences are behind these potential rate increases, including inflation, supply chain disruptions and changes in driving habits.
However, keep in mind that rates are highly personalized. Your premium depends on your individual rating factors like the type of vehicle you drive, your driving and claims history, and the coverage types and levels you choose. Mark Friedlander, the Director of Corporate Communications at the Insurance Information Institute (Triple-I), notes that “Even if you don’t make a claim, an increase in the volume or cost of claims from other drivers can boost auto insurance rates for all consumers in your city or state.” While we predict that, in general, auto insurance rates will increase in 2022, the amount of increase you see (if any) will depend on your unique situation.
Why are rates increasing?
Car insurance rates are calculated based on a number of underlying factors. Individually, your age (in all states except Hawaii), gender (in most states), driving history, vehicle type and coverage choices impact your premium. Additionally, broader factors also impact rates, such as if states pass revised insurance laws, the likelihood of claims occurring in certain areas or if vehicle repair costs increase.
Perhaps the biggest driver of higher 2022 car insurance premiums is inflation. Between December 2020 and December 2021, the Consumer Price Index (CPI) rose 7.0%. This means that, on average, we are spending 7.0% more than we were a year ago for the same goods and services.
Inflation pounded the new and used vehicle markets in 2021. The price for new cars and trucks rose by 11.8% between December 2020 and December 2021, while the used car and truck market saw a 37.3% increase. Vehicles are also much more complex than they used to be, which adds to the overall cost of ownership. Even small accidents can cause hundreds or thousands of dollars worth of damage to delicate electronics that require specialized repairs.
Vehicle costs aren’t the only thing struck by inflation. The cost of healthcare is also on the rise. The American Medical Association …….