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Why is auto insurance expensive?

If the cost of your car insurance is creeping up, it could be due to a number of factors related to who you are and how you drive — along with world events that could spur insurers to impose premium increases on auto insurance. Many factors — related to driving and otherwise — lead to expensive auto insurance premiums. Age, driving record, credit score and insurance history are a few important components that contribute to car insurance rates.

We outline below some common reasons auto insurance rates are high, along with some ways to reduce your insurance rates.

Why car insurance is so expensive in 2022

  • Inflation is the most significant cause of premium increases in 2022, with the average cost rising to $1,529 from $1,483.
    • This has also driven increases in 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.

See where we anticipate rates going in 2023.


1. Age

Car insurance companies conflate age and driving experience. Drivers younger than 25 often pay more for car insurance than do older drivers, due to a perceived lack of driving experience, and are considered higher risk. A young driver between the ages of 16 and 24 will pay 136% more for car insurance than a driver between the ages of 25 and 75.

Premiums by Age Group 2022

As a driver ages, their auto insurance rate typically decreases. Drivers see big savings on their 19th, 20th and 25th birthdays, specifically.

Young drivers should be especially mindful of displaying good driving habits. A bad driving record coupled with an age of less than 25 will lead to high premiums.


2. Credit history

Credit score is a primary contributor to a driver's car insurance rate. Federal Trade Commission (FTC) studies show drivers with poor credit file more claims than drivers with high credit scores (and file more costly claims). These drivers pose considerable risk to car insurance companies. On average, drivers with credit ratings in the "Very Poor" tier (300-579) pay $2,063 more per year than do drivers with credit scores in the "Excellent" range (800-850).

Premiums by Credit Score 2022

Each tier of credit score improvement comes with an average savings of 19% — or $440 annually — on auto insurance premiums.

If you have a clean driving record but think your car insurance rate is too high, check your credit score and see if it needs improvement. Even moving from the "Worst" credit tier to "Poor" yields the most savings — 14% or $471 per year.


3. Driving record

A driver's auto insurance premium could be expensive because of recent claims or driving violations. Speeding tickets, at-fault accidents and DUIs have major implications on insurance premiums. After any violation or claim, an insurer will upcharge a driver for three to five years. In California, drivers can be charged for up to 10 years after being convicted of DUI.

Below are some of the most expensive driving violations and their impact on rates. For example, a driver convicted of a hit-and-run should expect their premium to increase by an average of $1,077 per year, or $90 per month.

Premiums by Violation 2022

Comprehensive claims, generally considered to occur outside of the control of the driver, increase premiums by lesser amounts. On average, a comprehensive claim raises rates by $41 a year.

Not-at-fault accidents can also lead to elevated rates. Even when a driver was not at-fault in a collision, car insurance companies raise rates to cover the cost of the claims adjuster and overhead fees. Even without filing a claim, driving history could be a reason for high auto insurance rates.

Accident Annual Premium $ Difference
None $1,529 -
Comprehensive claim $1,570 $41
Not-at-fault accident $1,569 $40

4. Your location

Car insurance is regulated at the state level and priced at the ZIP code level. A driver could end up paying high car insurance rates because of claim frequency in their neighborhood or because of legislation in their state. Let's look at some of the most expensive states for car insurance.

Michigan

Michigan is a notoriously expensive state in which to insure a vehicle. Michigan drivers pay 73% more than the national average for car insurance.

Three primary factors contribute to Michigan's high auto insurance rates:

  1. Michigan requires no-fault insurance with unlimited Personal Injury Protection (PIP).
  2. The insurance coverage options offered in Michigan attract insurance fraud, litigation fees and expensive healthcare bills.
  3. Insurance companies have to charge higher premiums in Michigan to earn a profit.

Michigan’s four closest neighbors enjoy comparatively affordable auto insurance rates:

Michigan vs. Neighboring States Annual Car Insurance Premium
Ohio $1,028
Wisconsin $1,202
Indiana $1,261
Illinois $1,395
Michigan $2,639

Michigan's average car insurance rates are 116% more expensive than the combined average of Illinois, Wisconsin, Indiana and Ohio. Even with a great credit score and no claims, living in Michigan can cost you.

Florida

Florida is the third most expensive state in which to get car insurance, with a statewide average of $2,425 per year.

The major reason for this is the insurance companies' loss-to-profit ratio in Florida. Hurricanes and flooding result in car insurance companies paying out heavy claim losses on a regular basis.

Another reason why Florida is more expensive than average is its no-fault insurance. Although it does not require as much coverage as Michigan’s no-fault coverage, the state requires drivers to carry Personal Injury Protection at a minimum of $10,000.

Florida's Neighboring States Annual Premium
Alabama $1,379
Georgia $1,535
Florida $2,425

Louisiana

As of 2022, Louisiana overtook Michigan as the most expensive state for car insurance.

Like Florida, Louisiana is considered a high-risk state from the perspective of insurance providers, with an increased likelihood of claim losses due to how often hurricanes, flooding and other natural disasters can occur. This directly impacts insurers' bottom lines, resulting in high premiums for consumers.

The average cost of auto insurance in Louisiana is a whopping $3,265 per year — that's 24% more than the second priciest state, Michigan. 


5. Your car insurance company

You can't swap states simply because Texas has a higher cost of car insurance than Oklahoma — nor can you improve your credit score overnight. The only instant action you can take to lower your premium is to switch car insurance companies, as one of the primary reasons you might be paying too much for car insurance is who you're insured with. Some companies are more expensive than others, no matter your driving profile.

Why is car insurance so high for you? Enter your ZIP code below to calculate your rates and receive quotes from major car insurance companies.

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Will rates go back down in 2023?

In 2021 and 2022, an unprecedented number of insurance companies filed for rate increases. But it is possible that after a tumultuous year marked by inflation, supply chain disruptions, labor shortages and return of traffic levels, auto insurance rates could decrease if some or all of these factors are rectified. Premiums fluctuate year after year and depending on your state, it could be drastic or minuscule changes.

So while it's too soon to say definitively, the best thing you can do in the meantime is to look at the personal factors that affect your rate — especially if you've had any recent accidents or citations, aged out of your teen years or twenties or improved your credit. You can also reconsider your coverage: if your driving levels have changed, could telematics car insurance save you money? With the cost of repairs and vehicles going up, would it make sense to increase your liability limit?

Taking your time and diligently comparing quotes can pay off by finding an auto insurance policy that meets your coverage needs while helping you save in the midst of rising costs worldwide.

Ava Lynch photo
Ava LynchSenior Analyst

Ava worked in the insurance industry as an agent for four-plus years.

Ava currently provides insights and data analysis as one of The Zebra's property and casualty insurance experts. Her work has been featured in publications such as U.S. News & World Report, GasBuddy, Car and Driver, and Yahoo! Finance.

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 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.