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Why do car insurance rates increase?

Car insurance rates can rise annually even without personal accidents or violations. This is because insurers adjust rates to cover their annual claim payouts. If a company's claim expenses exceed its premium revenue, it typically passes on those costs to customers the following year. Our data shows a 5% hike in average car insurance premiums from 2022 to 2023. Despite being smaller than past increases, it's still a notable rise.

Now, let's delve into the reasons behind these rate hikes, with expert insights from our conversation with Mark Friedlander of the Insurance Information Institute.

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Why did my rate go up without an accident or ticket?

You can expect your car insurance premium to increase if you've committed any traffic violationsadded drivers to your policy, moved, changed or upgraded insurance coverage, or added a vehicle. If none of these events have occurred and you haven't filed an insurance claim, you could be wondering what sparked your higher premiums. Let's look at some overarching reasons why car insurance has increased, even with a clean driving record.

1. Ongoing effects of the pandemic

Unsurprisingly, the pandemic had a profound impact on the insurance market, the effects of which we are still seeing contribute to car insurance premiums today. Lockdown meant fewer drivers on the road and a lower threshold for accidents, resulting in far fewer claim payouts than average. Insurance companies were so profitable that policyholder rates were able to stay low.
 
However, the return to normalcy in 2021 and 2022 brought a sudden influx of vehicles back on the roads— these motorists, who had just taken a long break from traffic congestion, experienced accidents at a renewed rate. Suddenly insurance companies were forced to pay out claims again, leading to higher policyholder premiums to offset those losses. 
 
Mark Friedlander commented, "Loss costs have exceeded premiums charged for the past four years. This has led to ongoing rate filings by auto insurers and a year-over-year increase of nearly 20% in the cost of car insurance versus a year ago, according to the U.S. Bureau of Labor Statistics."

 

2. Rising replacement costs

The events of 2020 led to significant supply chain disruptions and parts shortages, which in turn raised replacement costs. These increased replacement costs directly influence insurance premiums, as insurers base potential claim payouts on the costs of replacing or repairing the insured items.

"Replacement costs have increased a cumulative 45% over the past four years due to supply chain disruption and the increasing cost of labor. Comparatively, inflation for the overall U.S. economy increased 15% within this same period,” says Friedlander.

3. Frequency of extreme weather

An increase in extreme weather nationally is also a reason for rate hikes. Unprecedented natural disasters and unexpected weather patterns often lead to vehicle damage, and an elevation of these events meant more claims payouts for insurance companies. Common examples include hurricanes, flooding, and wildfires.

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4. Higher overall percentage of losses

Insurance companies suffered extra losses from miscellaneous statistics, as well: “Other factors impacting the rising cost of auto insurance include more litigated claims due to increased accident severity, higher costs of medical care, a spike in uninsured motorists (14% national average at year-end 2022) and an escalation of vehicle thefts – more than 1 million cars were stolen in 2022, the highest volume since 2009,” Friedlander stated.

Key economic factors behind car insurance rate increases: 


Although it might seem unfair to suffer a rate increase without any moving violations, it's an unavoidable byproduct of how the auto insurance industry operates. Insurance companies need to maintain return-on-investment and minimize risk in order to stay viable. If they had to pay a greater number of claims than expected, they'll need to compensate for that with higher rates.

Other economic reasons for rate increases in car insurance:

  • Inflation is the most significant cause of premium increases in 2023. This has also made an impact on the costs of new and used cars and healthcare. Because car insurance covers much of these expenses after an accident, upticks in the price of cars and healthcare mean higher rates.
  • Another factor is that the cost of doing business has also been increasing: economic trends of supply chain disruptions and labor shortages have driven up operating costs for insurance companies.
  • After much of 2020 saw drastic reductions in driving habits, leading to fewer claims, a rebounding to pre-pandemic driving patterns has led to surges in claims and accidents.

Auto insurance trends: does car insurance go up every year? 

In the recent past, we have seen average car insurance premiums trending upward each year. While we can’t predict the future, we can use historical data to inform our predictions. "The Insurance Information Institute forecasts a negative underwriting result for the U.S. auto insurance industry in 2023, following a very poor performance in 2022. This is being driven by escalating loss costs combined with rising replacement costs," says Friedlander of the state of the insurance market.

It's true that car insurance prices have risen significantly; but we can't rule out possible declines in the future, provided some of the common reasons for rising costs find solutions. The table below shows average annual car insurance costs and percent changes from the previous year.

Year Average Annual Premium % Change YoY
2012 $1,276 -
2013 $1,195 -6.3%
2014 $1,229 +2.8%
2015 $1,280 +4.1%
2016 $1,368 +6.8%
2017 $1,437 +5%
2018 $1,521 +5.8%
2019 $1,544 +1.5%
2020 $1,483 -3.9%
2021 $1,529 +3.1%
2022 $1,759 +15%
2023 $1,851 +5%

Because car insurance is regulated at the state level and rated on a ZIP-by-ZIP basis, it's highly unique. Get a quote or continue reading below to see a state-by-state breakdown.


Save an average of $440 a year by comparing your options.

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Average auto insurance rate increases by state

At the state level, the past years have brought significant insurance cost changes — in some states, as much as over 40%.

Notable state rate changes:

Highest rate increases: 
  • Maryland: +55%
  • Washington, D.C.: +52%
  • Washington: +49%
Lowest rate decreases: 
  • Idaho: -11%
  • Louisiana: -17%
  • Michigan: -18%

Even though Louisiana and Michigan saw a decline in average rates in 2023, they are still two of the most expensive states in which to insure your vehicle. 

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Which car insurance companies have increased rates recently?

While it’s nearly impossible to track down specific rate changes for every insurance company, most major insurers factor rate increases into their premium calculations. Since rate increases aren't consistent across the industry, it's important to find the company that will increase your rates the least. The only real way to do this is to shop around for an insurance policy with the cheapest rates. Remember, the rate increase is dependent on the previous year’s return-on-investment — you'll need to consistently gather insurance quotes every six months to ensure the cost of your car insurance premium doesn't go up.

Frequently asked questions: Car insurance rate increases

Since 2022, the average car insurance premium increased by 5%.

In the past decade (with the exception of 2020), average car insurance rates have increased incrementally.

Make an informed decision: compare insurance rates today.

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About The Zebra

The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.

  • The Zebra’s insurance content is written and reviewed for accuracy by licensed insurance agents.
  • The Zebra’s insurance editorial content is not subject to review or alteration by insurance companies or partners.
  • The Zebra’s editorial team operates independently of the company’s partnerships and commercialization interests, publishing unbiased information for consumer benefit.
  • The auto insurance rates published on The Zebra’s pages are based on a comprehensive analysis of car insurance pricing data, evaluating more than 83 million insurance rates from across the United States.