The real reasons behind rising car insurance prices

Written by Katie Dee

Published on 2023-12-04

Read time: 3 min

In the past year, car insurance rates have risen exponentially, and understanding why might be the key to saving money on your own premium. Given the personalized nature of car insurance and with so many factors to consider, answering this question can feel daunting. In order to help consumers understand this complex issue, we have asked several industry experts the same question: why have car insurance rates risen faster than anything else in the economy in 2023?

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Modern Vehicles and Accident Frequency Elevate Fees

The recent surge in car insurance rates is because of several key factors. First, modern vehicles are equipped with advanced technology and safety features, increasing repair costs. These technologies are expensive to replace when damaged, driving up insurance claims.

In some areas, accident frequency and severity have increased, particularly in congested urban centers. Distracted driving and more vehicles on the road contribute to this trend, resulting in more claims and higher rates.

In summary, the recent car insurance rate increase is driven by the high cost of repairing modern vehicles, escalating medical expenses, increased accident rates, and the impact of inflation on repair and labor costs, all of which contribute to rates rising faster than inflation.

Justin Roberts, Owner, Amity Insurance Group

Rising Repair and Medical Costs Impact Prices

The constant increase in automobile insurance premiums is mostly attributable to the rising expense of repairs and medical care. Because of their advanced technology and complex parts, modern automobiles have significantly higher repair costs than their classic counterparts. Insurance rates have been affected by the high cost of repairing these complicated cars because of the need for specialist equipment and trained mechanics.

Douglas Mercer, Automotive Service Manager, Automotive Service Manager

Pandemic-Era Health-Care Expenses Raise Rates

Car insurance rates are increasing, partially because of growing healthcare expenses. Hospitalization costs and other medical services have skyrocketed since the pandemic, and this has had significant effects on the insurance industry.

More recently, there has been a noticeable increase in healthcare expenses. Just last year, the cost of medical services increased by 5.4%. Meanwhile, the amount most people pay for health insurance shot up by a significant 20.6%.

Coverage like Medical Payments (MedPay) and Personal Injury Protection (known as PIP insurance) help cover medical bills for both the driver and passengers after an accident. As these medical services become more expensive, car insurance companies raise their prices to balance out the costs.

James McNally, Managing Director, SDVH [Self Drive Vehicle Hire]

Inflation has played a major role

Car insurance rates have surged in recent years due to rising inflationary costs, increased accident frequency and severity (the cost to repair a car), and other factors. However, there are positive signs that rates are starting to stabilize across the country.

We are starting to see carriers slow down the rate filings and rate increases in several states as they achieve rate adequacy. Time will tell if the current round of rate filings is sufficient to be in compliance with regulations in each state. I’ve also seen several of the largest auto carriers post improved loss ratios over the last few months, indicating a leveling off.

Jason Wootton, CSO, Rate Retriever

Even with the increase in car insurance rates, there are still ways for you to save money. The quickest and easiest way to save is to compare costs from several different insurers in your area. Take our quick quiz to find the best car insurance company near you and access savings in just 30 seconds.

Frequently asked

How does the insurance company determine my rate?

Car insurance companies determine how much they charge you based on your driver profile. Factors that can impact your rates include:

Demographics – your age, home ownership, credit score, and more
Your driving history – how long you’ve been driving, traffic violations, and more
Your car – make, model, and year
Where you live – state and zip code
How much coverage you want

How do I switch my car insurance?

Switching your car insurance is easy, even if you are in the middle of your current policy.

Here are some helpful tips to consider to switch your car insurance:

Decide what coverage you want with your next policy
Check if your current provider charges cancellation penalties or fees
Compare prices from at least 3-5 insurance companies (Rate Retriever makes this easy, giving you personalized rates from the top companies near you)
Get a final quote from at least one of your choices
Cancel your current policy once your new one begins

How much car insurance do I need?

The answer to this question depends on where you live and what you would like to cover.

Each state has its own minimum requirements on the type and amount of insurance needed. When you’re trying to determine what and how much car insurance you need, you can start by reviewing your state’s requirements.

Find out what’s required in your state

Once you review your state’s minimum requirements, you may find that you want additional coverage. For example, sometimes owners of new cars want comprehensive coverage to insure their car from natural disasters and vandalism, even though comprehensive coverage isn’t required by their state. To figure out what insurance you want, you can review the different types of insurance to decide what makes the most sense for your situation.

Learn about the different types of car insurance

How is Rate Retriever different than other insurance websites?

The biggest difference between Rate Retriever and other comparison sites is that we are a free and impartial research tool NOT an insurance marketplace. This means you can’t purchase a policy directly through RateRetriever.com, but you can use our tool to independently research your options and seamlessly connect with the provider you choose.

Unlike other insurance comparison sites, we:

Use third-party data to give you more accurate rate estimates instead of inaccurate, suspiciously low quotes to get you in the door
Do not limit your list of results to paid advertisers
Do not collect your email or phone number before we let you see your results
Give you results after just five questions (however, your results will be more accurate if you complete your profile)

We like to think that Rate Retriever is your insurance companion, not just another insurance comparison site. Our values guide everything we do, which is why we strive to offer transparent, trustworthy insurance tools.

How can I get cheaper car insurance?

There are many ways you can try to get cheaper car insurance. The first is simply to get quotes from multiple providers. This will help you determine if you’re currently receiving the cheapest rates based on your needs and driver profile. Rate Retriever makes the comparison process easy.

Sometimes, the reason your car insurance is so expensive is due to your driver profile. For example, drivers under 20 years old usually pay more for insurance than more experienced drivers, and drivers with a recent at-fault accident or traffic violation typically pay more.

There are ways to lower the cost of your insurance such as taking a defensive driving course. Check with your provider to see if there are any discounts you qualify for or can reasonably earn.

How does Rate Retriever make money?

Rate Retriever works with national and local insurance providers to provide our users with a seamless insurance shopping experience. We may earn a commission from our insurance provider partners when you click on a link, call, or purchase a policy from one of the providers listed on our site. That said, we’re committed to providing you with accurate, bias-free information, and we do not allow our partnerships to limit the results or influence the information we share with you.

We do not sell your personal information, charge you for using our tools, or sell you insurance policies. Additionally, should you choose to purchase a policy from one of our partners, the price you pay will not be adversely affected.

Read our full earnings disclosure