A man driving his car.

Why are auto insurance rates going up?

Reasons behind rising car insurance premiums and ways to help manage them.

Everything seems to be getting more expensive lately, and auto insurance is no exception. According to Forbes Advisor, the cost of auto insurance went up more than 17% from July of 2022 to July of 2023. Here are some reasons why auto insurance rates are going up, along with what you can do to help manage your car insurance premium increase.

Some reasons for an auto insurance rate increase

During the global pandemic that started in 2020, federal and local governments enforced shelter-in-place and social distancing guidelines. We then saw fewer accidents and less expensive losses, due to less cars on the road, schools being virtual and many companies allowing their employees to work from home.

But now, a few years after the pandemic, roads are busy again, many people are working in-office and schools are back to in-person learning. This has resulted in an increase of car accidents and injuries, which has caused car insurance rates to rise.

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Inflation in the U.S. was at 3.4% in 2023. Even though it was not as high as the previous 2 years, it has been historically high compared to the last 15 years. This economic trend has affected the prices of many goods including groceries, gas, housing and cars. And because cars (both new and used) are now more expensive to get, repair and replace, it ends up affecting insurance rates.

Rising car repair costs

Supply chain disruption and labor issues that started during the pandemic and continue to this day, have impacted vehicle repair costs. This includes longer times to repair a car involved in an accident. As a result, there are additional costs associated with policyholders using a rental car longer while they wait for their car to be repaired.

Additionally, new technology, such as parking sensors, lane-departure warnings, and better battery technology, have added to the rising cost of repairs. While those smarter sensors and stronger devices can help improve safety, they are also more expensive to repair.

Electric vehicles

The ownership and use of hybrid and electric vehicles in the U.S. has become more popular in the last few years, with 16.3% of sales in 2023 compared to 12.9% of sales in 2022. Electric vehicles help the environment by producing less gas emissions, but they are more expensive to acquire, repair and replace, which can contribute to the increase of insurance rates.

Increased accidents due to distracted driving

According to a State Farm® survey, 67% of drivers said reading or sending texts while driving is distracting/very distracting, and over 70% of drivers report watching a video or recording video (67%) to be distracting/very distracting. Even voice-activated car commands can divert cognitive abilities and attention. Rethink using the phone while driving, and avoid being tempted by other driving distractions. If you have a teen, talk with them about safe driving habits. NHTSA research has found that the risk of accidents in teens is 23 times more likely when they are texting and driving.

Weather catastrophes

The U.S. experienced many weather disasters during 2023, several of them causing at least $1 billion in losses, according to Climate.gov. Among the weather catastrophes that our country encountered in 2023 were wildfires in Maui, Hawaii, historical floods in California and tropical cyclones. When severe weather strikes, it impacts the insurance industry and premiums can be affected. For example, State Farm paid $12 billion in catastrophic claims during 2023, compared to $7 billion paid in catastrophic claims during 2022.

Ways to help manage a rate increase

A Personal Price Plan™ helps you create an affordable price (just for you).1 Check with your State Farm agent about possible ways to save on your bill.

  • Drive Safe & Save® puts you in control of your premium by leveraging driving data to customize your own personal discount.2
  • Take advantage of other applicable discounts, such as Multiple Line Discount, Steer Clear® Safe Driver Discount for drivers under age 25 and the Good Student Discount.
  • Your policy choices impact your premium. Consider having a conversation with your agent to evaluate your current deductible and coverages to see if any changes are needed.

1 Prices are based on rating plans that vary by state. Coverage options are selected by the customer, and availability and eligibility may vary.

2 Discounts may exceed 30% and vary state-to-state (NY capped at 30%). Not available in CA, MA, RI. A discount may not be available in NC depending on individual facts and circumstances. Setup required.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

State Farm Mutual Automobile Insurance Company
State Farm Indemnity Company
Bloomington, IL

State Farm County Mutual Insurance Company of Texas
Richardson, TX

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