Let's dissect the data to predict how much car insurance will cost moving forward.
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Car insurance premiums have a nasty habit of rising each year — regardless of whether you've filed any claims. Why is that? Car insurance companies compensate for the money they pay out in claims per year through rate revisions. If an insurance company's claim payout total exceeded its premium revenue, it will often pass on those costs to customers the following year. On average, car insurance premiums increased by 2% between 2018 and 2019 — the most recent year for which data was available.
Let’s review the reasons behind car insurance rate increases.
You can expect your car insurance premium to increase if you've committed any traffic violations, added 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. In such a case, you could be the victim of a rate increase. In order to fully understand insurance rate increases, it’s important to know how insurance companies set your home or auto insurance premium. Most of the information used by car insurance companies is historical data used to predict what their future losses — or claim payments — could be.
Auto insurers don’t use only your information to create your profile. They also rely on related data, including your location, vehicle, age, credit score, and other factors to create a pricing profile. If you live in an area in which insurers experienced a higher loss-to-profit ratio than usual last year, you might experience a rate increase to account for the insurance company’s loss.
Common car insurance rate increase triggers include:
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.
Insurance companies do sometimes enact "rate decreases," in which the company reduces rates for some customers after the company enjoys a particularly profitable period. While rate decreases don’t happen as frequently as rate hikes, they do occur.
While we can’t predict the future, we can use historical data to inform our predictions. Over the past seven years, car insurance prices have risen significantly. The table below shows average annual car insurance costs and percent changes from the previous year.
|Year||Average Annual Premium||% Change YoY|
Looking at car insurance rates by region shows discrepancies based on geography. Some regions enjoyed rate decreases, while others endured significant premium increases. It all comes down to location.
|Region||2011 vs 2019 % Change|
Looking at geography alone only paints a portion of the picture. Because car insurance is regulated at the state level and rated on a ZIP-by-ZIP basis, it's highly unique. As there are more 50,000 zip codes in the US, our analysis sticks to specific states for the sake of brevity.
At the state level, the past eight years have brought significant insurance cost changes.
|State||2011 vs 2019 % Change||2018 to 2019 % Change|
|District of Columbia||4.45%||-12.53%|
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 shop for car insurance every six months to ensure the cost of your car insurance premium doesn't go up.
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 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.