While American motorists may be paying cheaper premiums at the pump, with gas prices slightly down over recent months, averaging at $3.068 per gallon as of January 2024, according to AAA Group estimates, the majority of these savings will likely be swallowed up by higher car insurance premiums that are expected to rise another 13% this year.
In a new State of Auto Insurance Report by ValuePenguin, forecasting data expects car insurance rates to soar by 12.6% across the United States this year, as repair costs, extreme weather conditions, and labor shortages contribute to rising premiums.
This is a massive blow to American motorists' already tight budgets following an 11.2% increase last year, which saw the average full auto insurance coverage rise to more than $2,000 per year. Now, vehicle owners are expected to see the cost of full auto insurance balloon above $165 per month in 2024, according to ValuePenguin.
A series of price hikes have sent car insurance premiums through the roof in recent years. In 2022, prices jumped 22%, while in the year before, rates were up a staggering 29%, according to estimates by Insurify.
Even the cheapest policy option, often a requirement by states, is expected to rise further this year. In 2023, these policies were roughly $1,154 per year or $96 per month.
Extreme Weather Are Driving Up Prices
In December last year, Chief Financial Officer at Allstate, Jess Marten said that the insurance giant will be implementing a series of rate increases of 30%, 14.6%, and 20%, across several states, starting in December and effective through February 2024.
The insurance provider managed to secure regulatory approval before the end of the year to increase insurance premiums for motorists in California, New York, and New Jersey.
The sudden surge in premiums comes after the company reported an adjusted net loss of $1.2 billion in Q2 2023, compared to $207 million reported in the same quarter a year before.
Allstate CEO Tom Wilson said that insured homeowners were among the majority of more than 160,000 customers the insurance company remediated during the first half of last year.
In total, the company claimed that during their second quarter, the majority of claims were due to severe and extreme weather conditions, following 42 catastrophe events, which incurred a net catastrophe loss of $2.7 billion during the reported quarter.
Data compiled by Bankrate revealed that extreme weather events have cost Americans more than $25 billion in 2023 alone. Even more than this, between 2013 and 2022, disastrous weather has cost the country more than $1.1 trillion in damages.
The U.S. Department of Labor estimates that severe rain and flooding account for roughly 75% of vehicle collisions, while other natural events, such as high winds, snow, sleet, and fog can typically impact driver ability and control.
The 2023 True Cost of Auto Insurance report published by Bankrate estimates that the average percent of income American drivers spend on their car insurance each year has risen from 2.57% in 2022 to roughly 2.93% last year.
Even more, car owners that have usually been able to afford full coverage car insurance could see prices going higher this year.
The average car insurance costs that stretch beyond minimum state requirements is nearly 156% higher than the minimum coverage policy, according to figures by Lemonade, an American insurance technology company.
What’s more, full policy coverage typically goes beyond a state’s minimum requirements, and while this may give drivers a peace of mind, higher prices in the coming months could see many beginning to downsize their policies in an attempt to dampen tight budgets.
Repairs And Replacing Parts Are Becoming More Costly
Despite headline consumer inflation trending downwards throughout last year following a series of interest rate hikes by a hawkish Federal Reserve, car repairs and parts replacements continue to outpace inflation figures due to worsening supply chain disruptions taking place across the world.
Motorists have found themselves stranded without vehicles for as long as 10 months at a time due to shortages of critical supplies. The majority of shortages have been focused around specific parts, including microchips and a series of electronic components.
More than this, the scarcity of critical parts and components has further driven up prices, making repairs even more costly for motorists paying out of pocket. Now, insurance companies are factoring in rising costs of parts, labor wages, and supply chain snarls as part of the equation for premium prices in 2024.
Dwindling supplies and a shortage of components aren’t the only things that are causing average car insurance costs to continue to rise higher and higher this year.
Labor shortages, followed by a six-week-long United Auto Workers (UAW) strike last year that targeted three of Detroit’s biggest automakers, including Ford, General Motors, and Stellantis caused yet another headwind for an already idle automotive industry.
After unionized workers laid down tools across several plants, moving the strike from assembly plants, to car dealerships and service centers, further damaged new-car inventory stockpiles and caused sticker prices for new cars to steadily edge upward.
In September last year, Cox Automotive estimated that new-car inventory levels in the U.S. stood at around two million, a number not last seen since April 2021 at the height of the pandemic.
Increasing worker wages has meant that car manufacturers are now passing costs down to consumers, steadily increasing new car prices to make up for lost profit.
This is somewhat surprising to some, seeing as Ford Motor Company had an estimated $169 billion in 12-month revenue last year, and General Motors reported $180 billion in revenue as of June 2023.
Stellantis reported a 12-month revenue of well over $200 billion between June 2022 and June 2023.
Where Americans Are Paying The Most For Car Insurance
Although there is not a definitive answer to which state currently has the highest rate of car insurance premiums, a review of several sources, including the same report released by ValuePenguin helps to better understand which Americans will be shelling out more this year for their car insurance.
According to ValuePenguin data, The Silver State of Nevada is expected to see the highest increase in car insurance premiums this year, leaping around 28%, while states such as Washington are estimated to have the second-biggest jump of 18%.
Elsewhere in places such as Arizona and Connecticut, both states will see an increase of 17%, while Louisiana and Georgia follow closely at 16%, respectively.
In other reports, experts predict that down south in Florida, residents might see full coverage insurance jump as high as $2,560 per year, or around $213 per month on average. Additionally, Delaware, which has been battling with some severe weather catastrophes in recent years, might see drivers pay as much as $2,137 per year or $178 per month.
Insurify data paints a relatively similar picture, only, their experts estimate that the state of New York will see car insurance premiums surge more than 67% above the national average, with the projected cost of full car insurance hovering around $3,374 per year or a staggering $281 per month.
Other states included on Insurify’s list of most expensive states for car insurance are Nevada, $2,975 per year; Florida, $2,917 per year; Delaware, $2,806 per year, and Louisiana, $2,972 per year. The District of Columbia falls into sixth place, with car insurance premiums estimated to reach more than $2,756 per year or $229 per month.
Ohio is one of a few states that’s considered to see auto insurance costs being roughly $625 below the national average, with Ohioans expected to cough up around $85 per month, or $1,023 annually, according to reporting by USA Today.
Higher car insurance premiums are systemically forcing drivers to take new measures to lower their monthly payments.
Roughly 12.31% of drivers have lowered coverage limits, while close to 11% have already switched insurance companies due to rising costs. A total of 5.31% of car owners have dropped full coverage, taking out bare-boned policies only in an attempt to abide by state regulations.
Looking for cheaper car insurance is now driving some Americans to move across town, to neighborhoods or areas where it’s safer to park their cars outside, as break-ins continue to rise, and are already up 2% in the last year. Moving states won’t fix much and perhaps cause more damage as the cost of living is now affecting the majority of Americans, hefty car insurance premiums are only another weight on their shoulders they will need to carry this year.
While there’s no telling where prices are heading, and how much of this burden American motorists can continue to pack, one thing is for sure, drivers will need to brace themselves, as this looks to be yet another tumultuous year, financially and economically for many of them.
