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Dec 20, 2023

How to Deal With Rising Auto Insurance Rates

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Premiums are up more than inflation, as insurers deal with rising repair bills and higher car rental rates. But consumers do have some options, experts say.

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By Ann Carrns

If you’ve recently gotten a more expensive car insurance bill, you’re not alone.

Auto insurance costs were up about 15 percent in March from a year earlier, significantly higher than the latest reading on overall inflation of 5 percent. The average annual premium is about $2,000, according to the personal finance website Bankrate.

And car insurance prices are expected to continue rising. This week, the chief executive of the insurer Progressive said in a shareholder letter that the company planned to be "aggressive with raising rates over the remainder of the year." Allstate said it expected to pursue additional increases in 2023 "to improve auto insurance profitability."

Higher costs for repairs, including for both auto parts and labor, along with higher costs for car rentals as a dearth of workers leads to longer repair times, all contribute to costlier claims and higher premiums, industry analysts say. "Everything associated with repairing is going up," said Stephen Crewdson, a senior director of insurance business intelligence at consumer research company J.D. Power.

As the pandemic has ebbed, more drivers have returned to the roads, whether for work or leisure travel, increasing the risk of accidents, said Robert Passmore, department vice president of personal lines with the American Property Casualty Insurance Association, an industry group. Bad habits acquired during the pandemic, like driving at faster speeds, have lingered, he added.

Doug Heller, director of insurance with the Consumer Federation of America, said many good drivers are being penalized with rates based on factors that have little to do with their driving. In most states, you may pay higher premiums if you have poor to fair credit, even if you have a pristine driving record. Insurers use a variation of consumer credit scores — similar to the ones lenders use to determine the risk of a borrower repaying debt — as one of several factors to assess a driver's likelihood of filing an insurance claim.

A recent report by the Consumer Federation of America about insurance premiums in New York found that drivers with perfect driving records and excellent credit pay an average of $730 a year for basic insurance, while drivers with the same driving record but poor credit average almost $2,100. The federation supports eliminating the use of credit scoring in insurance rating, saying it especially harms lower-income customers and people who live in minority neighborhoods. (At least three states — California, Hawaii and Massachusetts — bar the use of credit scoring in setting these premiums, and a few others limit its use.)

Insurers defend giving better rates to drivers with good credit, saying it makes sense because those customers are less likely to file insurance claims. "The vast majority of customers get a better rate because we’re using credit scoring," Mr. Passmore said.

Car insurance is hard to avoid because basic coverage is mandatory in most states. So what can you do to lower your bill? Chuck Bell, programs director of advocacy at Consumer Reports, recommends seeking out three or four quotes from different insurers to see if they can offer lower rates. Many consumers remain with the same insurer for decades, he said, but it's smart to check prices from time to time. "We think you should shop annually," he said.

While many people "would rather get a root canal," he said, getting auto insurance quotes isn't difficult. He suggests calling insurers on the phone, but you can also get quotes directly on insurer websites. (Sites that aggregate information can give you a general idea, he said. But for specific quotes, it's best to deal directly with insurers or independent agents that represent multiple carriers.) Have your current policy handy so you can easily compare coverage.

The higher premiums are, in fact, pushing drivers to shop around for lower rates, according to recent findings from J.D. Power. "They’re actively looking for a better deal," Mr. Crewdson said.

The share of households shopping for auto insurance in the prior month averaged 13 percent in March, the highest since mid-2021, according to J.D. Power, which based its findings on daily online surveys of up to 1,000 consumers. The average switch rate — households who changed insurers in the prior month — ticked above 4 percent in March, compared with an average of 3.6 percent for all of 2022 and 3.4 percent for 2021.

If you’re looking to buy a car, you can help keep insurance costs down from the start when car shopping, by focusing on models that are less costly to insure, Mr. Bell said. Rather than a large pickup truck or S.U.V., consider crossover vehicles, he said, which tend to be less expensive to insure.

If your car is an older model with a lower value, you could cut your premium by reducing collision coverage, which pays to fix or replace your car when it's damaged in a crash with another car or an object like a fence, and comprehensive coverage, which covers the theft of your car and damage from things like branches falling on it.

Insurers also offer usage-based insurance, which involves having a device in your car that monitors your mileage and driving habits. The insurer then factors the data into your premium. If you are a safe driver and comfortable sharing data with your insurer, or if you are driving less, you could benefit. "It's a way to save money, for some people," Mr. Bell said.

Here are some questions and answers about how to lower your car insurance premiums:

Raising your credit score may help lower your premium. Paying your bills on time and avoiding maxing out your credit cards — keeping what credit bureaus call "utilization" low — can help increase your score. You should also limit the number of new credit card accounts you open and loans that you take out. You can check your credit report for accuracy free by visiting www.annualcreditreport.com.

Some insurers don't use credit scoring in setting premiums — CURE Auto Insurance, for instance, says it does not — so it's worth asking about when you are shopping for coverage.

Yes. Choosing a higher deductible — the portion of the bill for a claim that you are responsible for, before the insurance policy pays — can lower your premium. Going from a deductible of $500 to $1,000 can save an average of about 10 percent on your premium, Mr. Bell said. If you can, put away the savings on your premium to help pay the deductible, should you have to file a claim.

State insurance departments may have information to help you compare rates as well as service levels at different insurers. Texas, for instance, has a detailed tool for getting quotes, and Massachusetts offers a spreadsheet to help with comparisons. The National Association of Insurance Commissioners offers a map of state insurance departments, and maintains a complaint index that consumers can use to see if their insurance company is above or below average.

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