Will Car Insurance Costs Go Down in 2023?

The average car insurance rate in the U.S is $1,834.86 a year, according to an average of 365 days worth of car insurance quotes delivered via SmartFinancial. There are six reasons why insurance rates have gone up across the board. Your particular policy may be even more expensive if you’ve had an accident, several traffic citations or a DUI, if you have a low credit score, you’ve filed several claims or had a lapse in insurance. Here are the most common reasons you’re paying more for car insurance than ever, if none of the above apply to you, and when you can expect to see rates go down.

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  Why Have Insurance Costs Increased?

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  When Will Car Insurance Costs Go Down?

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  Car Insurance Costs 2023 FAQs

Why Have Insurance Costs Increased?

1. Accidents Are on the Rise

This is true across the country, and accidents increase everyone’s insurance costs.  In 2022, insurance rates increased by about 9% because accidents have become more expensive for insurance companies to cover. Even if you haven’t had an accident, because there is a greater chance that you may be involved in one, your rates go up too. As unfair as that may seem, it’s the only way insurance companies can cover the payments to customers who file claims.

In 2022, insurance rates increased by about 9% and are expected to go up 12-13% in 2023.

2. Accidents Are More Severe

The United States Department of Transportation estimates that 9,560 people died in car crashes in the first quarter of 2022 – a 7% increase from the same quarter in 2021. Coverage for injuries is expensive, especially when people don’t have health insurance.

Say you were involved in a car accident that was not your fault and you and your passengers all ended up in the hospital. That would cost thousands of dollars that the other driver’s liability insurance would have to cover. If the at-fault driver doesn’t have insurance, that’s another expensive mess for insurers (read more on this below).

Keep in mind that when someone is at fault in an accident and only has minimum state required car insurance, they are not covered for their own injuries and neither are their passengers, unless they have medical payments coverage, which is an optional type of insurance many people do not have.

Insurance companies are paying too many injury and funeral-related costs and have had to raise rates to be able to continue insuring their customers.

3. Cost of Parts and Labor

Car insurance companies have to shoulder the responsibility of repairing or replacing vehicles. With the rise in accidents, these payouts add up to astronomical figures. Newer cars have long been more costly to repair and replace due to their hefty price tags, but inflationary prices on the necessary tools and parts to repair a car after an accident is causing premiums to go up even more significantly.

The cost of labor for newer and more technologically advanced cars is reflected in rising insurance rates as well. Not all mechanics are qualified to work on highly computerized cars with sensors and cameras. The cost of these expensive parts and the cost of hiring specialized technicians is absorbed in everyone’s car insurance premiums.

Tires damaged from a collision are covered by collision coverage (or the other driver’s liability coverage if the accident was their fault). Tires stolen or slashed need to be replaced by comprehensive coverage.

Tire prices went up 20% from 2020 to 2021 while it cost manufacturers 24% more to make tires in 2021. Inflation has even affected logistics and overhead costs for tire companies, and they are now charging higher prices for their tires. To make up for the price markups, insurance rates have been increased to absorb all those tire replacements due to vandalism or accidents.

The average car insurance rate in the U.S is $1,834.86 a year.

4. Uninsured Drivers Increase Rates Across the Country

There were nearly half a million more uninsured drivers in 2019 compared with 2015. So as to absorb the losses caused by uninsured motorists, insurance companies have raised everyone’s rates.

To see why uninsured drivers are so costly, here’s an example: If your collision coverage pays for repairs after your car is hit by an at-fault uninsured driver, your rates go up if you file a claim. When insurance companies see a trend of hit-and-run accidents or collisions involving uninsured drivers, they raise everyone’s rates to cover these losses. So, if there is an uptick of accidents involving uninsured drivers in your neighborhood, all rates for drivers in your neighborhood will go up.

Note: Buying uninsured motorist coverage can help you avoid paying out of pocket if you don’t have collision coverage.

5. Car Vandalism and Robbery

Not only is carjacking on the rise, but catalytic converter thefts jumped 325% between 2019 and 2020. State Farm paid more than $33.7 million in claim payouts to customers between July 2020 and June 2021. Comprehensive coverage covers carjacking and parts theft, which did not decrease in 2022, and we all pay the price for car-related crimes.

6. High Car Prices

The shortage of semiconductor chips used to make newer car models slowed down production of cars and drove up to prices. The average cost of a new car is  $48,301. One of the biggest factors that determines car insurance rates is the value of a car. When prices are high, insurance rates go up. Even if you drive a 10 year old car, the presence of more expensive cars on the road drives up insurance costs for everyone.

When Will Car Insurance Costs Go Down?

Aside from getting inflation under control, there are two other ways to lower car insurance rates across the country:

Eliminate Distracted Driving

If distracted driving is eliminated, car insurance rates will decrease significantly. Despite commercials and ads about the dangers of distracted driving, drivers still use their phones and other devices while driving. Even though it’s a tool for the road, playing with GPS settings can cause a collision. Checking an email, as urgent as it may be, can be deadly.

Distracted driving claimed 3,142 lives and caused 324,000 injuries in 2020, according to the U.S. Department of Transportation. Not only are these numbers tragic, but they are expensive and raise car insurance rates across the board.

Insure Uninsured Drivers

If more drivers bought state required car insurance, everyone’s rates would go down. Half a million uninsured drivers on the roads is expensive for everyone else on the road! Companies like SmartFinancial try to help by making it easy to get insured fast, cheaply and without ever leaving home.

If you know someone who is driving without car insurance, tell them to reach out to us for affordable car insurance. It’s better for the uninsured driver and for the rest of us, who will have to pick up their tab otherwise.

File Fewer Claims

Your rates don’t go up if you don’t file an insurance claim but they do if you file a claim for an accident, even if it wasn’t your fault. If fewer claims are filed where in your neighborhood, you and all your neighbors may see a drop in rates and vice versa. Insurance companies typically only raise rates to compensate for all the claim payouts they expect in a given area. If people in your neighborhood avoid frivolous claims, you’ll all save some money.

Inflation and Market Factors Stabilize

Even the most astute economists have different theories on when inflation will go down and some are hopeful that they will in 2023 but car insurance prices are expected to rise 12 to 13%, keeping car insurance prices relatively high. While there isn’t much you can do about inflation, you can find competitively priced rates by comparing car insurance rates every six months. If you stay accident and citation free, you may save hundreds of dollars a year.

Get Personalized Car Insurance Quotes Here

It’s possible to save money, especially if you haven’t compared insurance quotes in a few months

Your best bet if you’re trying to pay lower insurance bills is to compare rates with SmartFinancial, a service that is completely free and without any obligations. All you have to do is enter your zip code and answer some questions and you will receive calls from agents offering the lowest rates in your area.