You didn’t have an accident. You didn’t file a claim. You didn’t even get a speeding ticket. So why might your car insurance rate increase anyway? To understand rate increases, it’s important to know that premium calculations are based on your risk and the projected cost it would take to repair or replace your car. Anything that impacts these factors — a spike in car theft or accidents in your area, inflation hikes the price of car parts or labor — can explain why rates may increase. 

Reason 1: Inflation hits the cost of buying and repairing a car 

Turn on your car radio and it’s all you hear: Prices are up, and COVID-19 is a big reason. Inflation has been rising at a faster rate than at any time in the last 40 years. Supply chain bottlenecks, labor shortages, and pandemic-fueled demand all play a role.

COVID-19 drastically slowed production of microchips and other critical parts necessary to build new cars. Prices for cars and parts soared because of these supply chain delays, and labor shortages pushed up costs further. The strains hit repair shops too, and repair bills have shot up. The result: car prices accelerated even faster than inflation. Between December 2020 and December 2021, new car prices went up almost 12 percent, and prices soared even higher for used cars and trucks — 37 percent, according to a consumer price index report from the Bureau of Labor Statistics. This was the largest 12-month change for cars in the history of the index.

All of this means one thing: as costs for goods go up, so does the cost of repairing and replacing cars if they are damaged, destroyed or stolen.  

Another factor: our cars are equipped with more computers and automated functions than ever before. That makes for a great, and potentially safer, ride — but it also translates to more expensive repairs and replacement, and that trickles down to drivers’ insurance premiums.

Reason 2: More accidents and more injuries

Not only have the cars changed, but we drivers have changed, too. Even if you’re a safe driver, car accidents caused by other drivers on the road continue to climb in frequency, and injuries are more serious, according to the National Highway Transportation and Safety Administration (NHTSA). And that’s pushed the cost of liability insurance up. 

When the pandemic hit, drivers stayed home. But that didn’t last, and when drivers got back in their cars, a surge of dangerous behaviors — impaired driving, speeding, distracted driving, and not wearing seatbelts, among them — led to a big rise in accidents, injuries and fatalities. Traffic deaths rose 12 percent in the first nine months of 2021 (the highest number of any year since 2006), according to NHTSA. 

Reason 3: Rising healthcare costs

Rising healthcare costs aren’t news — but there’s been no sign of a slowdown, and that’s an ongoing factor impacting insurance rates. Almost all states require liability insurance, which may help with costs related to injuries, legal fees, or settlements from lawsuits. When you tally all those factors up — more injuries, bigger hospital bills, more lawsuits — you’ll see the cost of liability insurance rise, too.

Reason 4: More severe weather globally

Tornadoes, floods, hail, wildfires — these catastrophic events are increasing in intensity, which means more damage and higher insurance costs. Typically, your car’s comprehensive coverage helps with repairs caused by a natural disaster. If your area is becoming more prone to disaster, risk increases and rates can go up. 

Reason 5: Crime is up

During 2021, 932,329 cars, trucks and SUVs were stolen in the United States, according to the National Insurance Crime Bureau (NICB). That’s one vehicle stolen every 34 seconds, every day, for a year — the highest number in a decade. This was a 6% increase over 2020, and a 17% increase since 2019. Catalytic converters — expensive auto parts that are increasingly popular bounty for thieves — were stolen at a rate four times higher than the year prior, and the numbers keep growing. Chances are, if this is happening in your area, it might affect comprehensive coverage rates.

Looking for ways to save on car insurance?

• Review your insurance policy limits and deductibles. Higher deductibles can mean lower premiums.
• Farmers discounts may be available for bundling Home, Auto, and Life policies, setting up auto payment, and more. 
• Keep up with regular maintenance that can keep your car in top shape longer and keep it looking new.