Owning a vehicle is a necessity for most Americans, with a staggering 91.7% of all households owning at least one. Amid rising car prices and fluctuating gas costs, car ownership is more expensive than ever. Adding to this burden, car insurance costs are soaring, with insurers warning of further increases on the horizon.

The New York Times recently covered the steep rise in car insurance costs, noting a staggering fact that motor vehicle insurance prices surged over 22% in the year through April. This marks the fastest increase since the 1970s and car insurance is a prominent factor in slowing the cooling of inflation. 

What factors contribute to car insurance premiums 

Car insurance premiums can vary widely based on several contributing factors.

• Age: Young drivers typically face the highest premiums.
• Driving History: Your premiums are influenced by your record of tickets, violations, and past claims.
• Location: State regulations, such as whether your state is a no-fault state like New York, play a significant role in determining your insurance costs.
• Credit Score: Many overlook this factor, but data shows that drivers with poor credit are statistically more likely to file claims, leading to higher premiums.

Additional factors that may raise your premium include the type of vehicle you drive, your annual mileage and usage, your coverage levels and deductibles, and various personal demographics.

Why is it so much higher in New York?

New York car insurance prices are generally higher than the national average and there are a few factors contributing to this. First, New York is a no-fault state, meaning you can file a claim with your insurance provider after an accident, regardless of who is at fault. No-fault states typically require additional coverage, such as personal injury protection (PIP) and that extra coverage increases the premium.

Additionally, the cost of healthcare in New York is much higher than the national average, leading insurance carriers to set higher policy premiums to cover these expenses. Lastly, severe weather risks, including hurricanes and winter storms common in the Mid-Atlantic region contribute to higher premiums. Carriers account for these potential financial risks, and the result is elevated costs for policyholders. 

How COVID-19 affected the price of car insurance

The pandemic caused significant stress on the car insurance industry due to its unpredictable nature. The shift from a near-total shutdown with minimal driving to a surge of drivers returning to the roads—and causing accidents after an extended break—created a highly volatile period for insurers, marked by swings from incredible profitability to substantial losses. Although insurers collectively pushed for rate increases, state regulators did not immediately start approving these requests.

“Inefficient regulatory environments in states like California, New Jersey, and New York, combined with inflation and increased catastrophic losses, have left consumers with fewer choices of insurers and higher costs,” said Neil Alldredge, the president of the National Association of Mutual Insurance Companies, in a recent NY Times article.

What’s next for car insurance premiums

A pressing question for many Americans is, how much higher will premiums go? In 2021, insurers’ personal auto businesses started recording losses, accounting to $4 billion in 2021, $33 billion in 2022, and around $17 billion in 2023. It’s clear that it will take time for insurance companies to stabilize their rates. After an 14% raise in auto premiums last year, Dale Porfilio, the chief insurance officer at the Insurance Information Group, predicts that premiums will rise another 13% this year.

Understanding the reasons behind the cost of car insurance can help you make informed decisions and potentially find ways to reduce your premiums. Reviewing your policy with a trusted attorney like the North Shore Injury Lawyer Mark T. Freeley is a great way to ensure you understand your options as best as possible. With over 30 years of experience fighting insurance companies on behalf of his clients, Mark is ready to help.  If you have any questions about your car insurance policy, give him a call at 631-495-9435 he will happily guide you through the choices, for free.