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How Does Inflation Impact My Auto Insurance?

    3 minute read

    To set premiums, insurance providers consider multiple factors such as location data, claims history, and even the cost of repairs. When these costs increase, so do the price of insurance premiums. And unfortunately for consumers, ongoing inflation has caused auto prices to jump significantly across the board.

    With prices increasing, it is important to review your current policy to determine if any changes are required. Furthermore, comparing quotes at renewal could potentially help you save. To help our customers, we put together this guide on what you need to know about inflation and its effects on auto insurance.

    Inflation Overview 

    Over the last 12 months, prices for all items have increased at a rate of 8.5%, according to the latest Consumer Price Index report. This represents the fastest growth in inflation since 1982. Below are examples of how much costs associated with auto insurance have increased since 2021:

    Sign of a used car showing that it had one previous owner. Sale price for a 2005 car is $25,995.
    • Used car prices: +35.3%
    • New car prices: +12.5%
    • Transportation services: +7.7%
    • Auto repair costs: +4.2%
    • Medical care services: +2.9%

    As shown, car prices—both new and used—have significantly increased.

    How Does Inflation Affect My Auto Insurance Coverage? 

    One of the main ways inflation affects auto insurance is through auto costs. Because car and car part prices have skyrocketed, the cost to repair a totaled vehicle has also increased. Furthermore, delays in supply chain issues and chip shortages have reduced the supply of new cars available, resulting in elevated prices for both used and rental vehicles.

    Some policies provide rentals to consumers while their vehicles are under repair. However, body shops across the country continue to struggle with obtaining replacement parts (which have also increased in price). Therefore, insurers are often paying for more rental car days for applicable policies. Consider reviewing your policy for daily rental allowance and how many days of rental coverage you have to keep yourself properly covered. 

    Because prices have gone up, insurance providers must update their rates to reflect the changes, which leads to rate increases. However, other factors are also at play.

    auto accident involving two cars on the road

    In 2020, many providers lowered rates, and some even provided discounts due to reduced driving levels. Now, insurance providers are playing catch up. While traffic rates are returning to their pre-pandemic numbers, we are also observing a substantial increase in traffic accidents. According to an analysis of federal data, vehicle deaths rose 17.5% from the summers of 2019 to 2021. Because most states require liability insurance to cover medical costs in an accident, increased medical expenses could also affect how providers plan their rate changes.

    How To Save On Your Auto Insurance Rate 

    While you cannot control how insurers price their policies, there are some steps you can take to potentially avoid facing a higher premium. Here are some tips to follow that may help you reduce your rate:

    • Compare auto insurance quotes: The easiest way to save on auto insurance is to compare rates from multiple providers. Coverage costs vary significantly between insurers, and each may calculate factors differently. At AIS, we always recommend comparing rates at renewal to maximize your saving potential.
    Individuals looking at a computer and comparing numbers
    • Ask about discounts: While inflation may raise rates overall, auto insurance discounts can help reduce your payment amount. Whenever speaking with your insurance specialist, be sure to ask if there are any discounts that you may qualify for. Providers typically offer discounts for bundling policies, safe driving, and even for paying in full. Available discounts may vary by location.
    • Increase your deductible: Increasing your deductible could be another way of reducing your premium. However, be sure to carefully review any changes you make to your plan’s deductible. The higher your deductible, the more you will pay out of pocket in an accident, so be sure to choose a price you can afford.

    Save On Auto Insurance With AIS

    With prices increasing across the board, finding ways to save is essential. At AIS, we work with a network of insurance partners to find the best coverage for you at the right price. So, call us at (888) 772-4247 or get a free online quote to start saving today.

    The information in this article is obtained from various sources and offered for educational purposes only. Furthermore, it should not replace the advice of a qualified professional. The definitions, terms, and coverage in a given policy may be different than those suggested here. No warranty or appropriateness for a specific purpose is expressed or implied.