How to Save on Auto Insurance Despite Inflation and Rising Premiums

If you need further confirmation that things are more expensive, this week’s Consumer Price Index update made it official: prices in January were 7.5% higher than ‘one year ago. That’s a level not seen in 40 years, according to the Bureau of Labor Statistics. The CPI measures the cost of a range of consumer goods from utilities to fuel to groceries.

One of the categories that has seen the biggest price increase is used cars: they were more than 40% more expensive than 12 months ago, according to the BLS. New car prices have not climbed as high, but they are still 12% more expensive than a year ago.

Whether you’re looking for a new vehicle or not, a major cost shared by all car owners is also on the rise, says Sarah Foster, economics editor at Bankrate: your insurance premium.

“Car insurance rates are a very underrated area where inflation lurks right now,” says Foster, and given the rising prices of other things associated with driving, she says that it makes sense that car insurance premiums follow suit. .

“Not only do drivers pay more at the pump or spend more money for a car when it’s in the market, but they also spend a lot more to insure it,” Foster says. All aspects of the driving profession have been criticized by inflation.”

Insurance companies are hit with a ‘one-two punch’

Something funny happened at the start of the pandemic: Not only did car insurance premiums go down, but many providers even reimbursed their policyholders, says Foster.

“There weren’t a lot of cars on the road because people were just hunkered down at home during the lockdown,” says Foster, and as a result insurance companies adjusted their rates in favor of drivers. “That usually doesn’t happen.”

Those days are long gone.

As more and more people are back on the road, claims are flooding in again and these accidents are causing more damage. These factors, along with inflation, have already pushed premiums up and will likely continue to do so for the remainder of 2022.

It’s a “one-two punch” that hits businesses hard, Foster says. “They have to pay their reserves to cover the claims that come in.”

Premiums are rising across the country

Auto insurance was up 4% in January from the same month in 2021, and is likely to grow across the board as the year progresses, experts say.

“Rates are already rising due to inflationary pressures, and the increases could continue,” says Martin Ellingsworth, executive managing director of Global Insurance Intelligence at JD Power. “At the same time, insurers will need to balance the pressures not to raise policy rates too much or set them too low.”

Allstate alone has had 20 rate increases approved in 13 states since November 2021, according to Bankrate.

Data from insurance search engine The Zebra shows that insurance premiums have risen in three-quarters of US states this year.

The majority of these price increases are under 10%, but states like Louisiana, Ohio, Rhode Island, Washington and Wisconsin are seeing double-digit increases starting in 2021.

In a time of high inflation, it’s more important than ever to be a smart consumer

Rising rates “will make consumers more likely to seek out better prices,” Ellingsworth says, and while higher prices are never good consumers, there are things you can do to get the best insurance deal. automobile despite the increase in premiums and today’s high level. inflationary environment.

Here are some expert tips:

  • Compare the prices. Review your policy, research competitors, and shop around. “Drivers don’t necessarily know right now how much their car insurance is going to increase this year,” Foster says, so keep an eye out for your policy renewal, which will typically arrive 30 days before your new policy starts to the year. Once you have that number in hand, see what other deals you can score.
  • Personalize your insurance even more. Your insurance policy probably already uses your personal data, from your driving history to the age of the car you’re driving, to calculate your rate. Ellingsworth predicts that politics will become even more personal in the future.

    “Expect to see more of this in the coming months, as well as greater adoption of ways to check driver risk factors,” he says. For example, if you’re okay with a box in your car that reports your driving habits to the cloud in real time, that could benefit your rate.

  • Watch out for discounts. Even if you can’t reduce your premium, many insurance companies offer discounts, especially if you have multiple policies with the same insurer. Consider “other ways to save, like reducing the amount you pay for other policies like your home or renter’s insurance,” says Foster.

    If you always drive less than you were before the pandemic, make sure you’re enrolled in a low-mileage insurance plan or a safe driver discount, she says.

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