Auto premiums could climb another 12% in 2023
The auto rate increase comes on the heels of major increases in the cost of new and used vehicles since 2019.
In the decade prior to the COVID-19 pandemic, new car prices saw a 3% average annual increase, but after a larger 5% increase between 2019 and 2020, prices spiked 17.2% between 2020 and 2021, says a report from the Zebra. In 2019, the average new car cost $36,824, and it is projected to climb over $47,000 by the close of 2021.
Used cars have followed a similar trend, with the average price of a preowned vehicle increasing from $19,863 in 2019 to $28,205 in 2021.
Auto insurance premiums have risen alongside car prices as the increased cost of vehicle repair and replacement has forced carriers to compensate for lost profits. According to a recent report from Insurify, the average yearly auto premium in 2019 was $1,400, but in 2022, the average annual rate hit $1,648 – an increase of around 17.7%. They predict insureds could pay an average of $1,846 – an additional 12% – for auto coverage in 2023.
They attribute this increase to a number of factors, including nationwide inflation and trends in driving violations, as well as the heightened number of accidents and dangerous driving habits that have occurred since the pandemic began, which have resulted in higher claim payouts for auto carriers.
Supply chain issues have also contributed to the rising costs associated with automobile ownership. Notably, increased demand for vehicles led to a semiconductor chip shortage, which has left thousands of vehicles sitting unusable as they wait for chips. This has kept the customer options slim in many car lots across the country, which has driven costs. U.S. News and World Report predicts the chip shortage could continue into 2023 or 2024, depending on whether the demand for new vehicles wanes.