The auto insurance industry continues to evolve based on economic conditions, new legislation and technology. To better understand the 2024 auto insurance trends, we spoke with a few experts to give their thoughts on what we can expect in the coming year.
In general, they agreed that the main focus in 2024 will be car insurance rates, which the Bureau of Labor Statistics estimates will increase by 18.9% from last year, and if they can plateau or decline. Find out if new state legislation can control rising insurance costs or if a usage-based insurance program can be a good solution for drivers looking to lower their premiums.
Car insurance costs remain high
Many factors are contributing to the increase in car insurance premiums in 2023, led by inflation.
“Inflation is probably the biggest factor affecting the cost of auto insurance because inflation affects the cost of everything,” said Robert Passmore, spokesman for the Property Insurance Underwriters Association of America (APCIA), a trade group for property/casualty insurance. “This covers a lot of car insurance that pays for medical care and vehicle repairs.”
“Insurers automatically continue to raise rates because losses, such as paying accident claims, exceed written premiums,” said Mark Friedlander, a spokesman for the Insurance Information Institute. The Insurance Information Institute predicts that the personal auto insurance industry will end in 2023 with negative coverage. This means that for every dollar collected in rewards, $1.09 is paid out. ”
When car insurance companies pay out more than what they take in, their natural response is to raise rates to try and reverse that trend.
Medical Costs Drain Auto Insurance Companies
Rising accident rates and accident claims costs will contribute to higher car insurance rates in 2024. The cost of property damage claims from car crashes has increased almost 50% from 2018 to 2022, according to a 2023 report from the APCIA. Over the same period, the average bodily injury claim cost increased by 40%.
The APCIA report says that one of the major factors impacting the rising cost of insurance claims is medical inflation. Over the past five years, the cost of medical and hospital services has outpaced the rate of overall inflation. As a result, insurance companies are paying higher amounts for bodily injury liability claims. Insurance customers will end up paying for the higher medical claims through premium increases.
Complex Auto Repairs Hammer Car Insurers
In addition to the price of parts and rising labor costs, Passmore says that the technology used in new vehicles makes them more difficult and expensive to repair. A good example of this is windshield repairs.
“When you had a broken windshield in the past, it was a fairly straightforward job that could be done anywhere. But in many new cars, the windshield is responsible for anti-collision technologies, like automated driver assistance features.”
”If you need to replace the windshield in a new vehicle, you have to replace the glass and recalibrate all the sensors and systems, which can double the cost of the windshield replacement.” – Robert Passmore
The cost of car repair has ramped up as the number of vehicle components and their complexity have shot up, reports the 2023 Crash Course study by CCC Intelligent Solutions. The study finds that increasing vehicle complexity results in higher repair and car insurance claim costs because:
- Repairs need more parts so more labor hours are required for repairs.
- Vehicle parts are more expensive due to newer material types.
- Replacing parts requires specialized labor skill sets that lead to more expensive labor costs.
- It’s harder to detect all of the damage upfront, leading to supplemental claims for the additional repair work.
- High demand and low supply of parts like semiconductor chips have hiked up vehicle prices, which means car insurers are paying out more for total loss claims.
Longer repair times mean drivers with rental reimbursement coverage keep their rental vehicles for longer periods, contributing to higher claim payouts and compelling insurers to raise premiums. Enterprise Rent-A-Car tracks the length of time drivers keep rental cars and finds those waiting for non-driveable vehicles to be repaired after an accident have a rental for an average time of 26 days.
Larger Litigation Payouts
Car insurance lawsuits are being settled for more money, impacting insurance companies and consumers alike. Data from Current Award Trends in Personal Injury, a book that is part of a research series by Jury Verdict Research, Inc., shows that the median personal injury judgment has gone up by nearly 320% between 2010 and 2022.
When will consumers get some relief in their car insurance rates?
High auto insurance rates will continue heading into 2024, says Stephen Crewdson, spokesperson for J.D. Power. However, he says it’s possible rates will cool by the end of next year if cost pressures level off.
A grimmer outlook on car insurance costs for 2024 is forecasted by David Blades, associate director of industry research and analytics for AM Best, a credit rating agency and data analytics provider specializing in the insurance industry.
Blades finds it hard to imagine auto insurance rates leveling off soon due to inflation combined with additional challenges, such as more frequent severe weather events that lead to more comprehensive insurance claims and rising litigation costs affecting insurers due to higher lawsuit payouts.
More Uninsured Drivers
As car insurance rates trend upwards, more drivers might decide not to buy car insurance—even though almost all states require it in order to drive legally.
The number of U.S. households with at least one vehicle who say they don’t have car insurance increased slightly during the first half of 2023, up to 5.7% from 5.3% in the second half of 2022, according to J.D. Power.
Twelve states have already seen an increase of 30% or more in uninsured drivers. J.D. Power says the top states for increases in uninsured drivers are:
- South Dakota up 106%.
- New Hampshire up 84%.
- West Virginia up 50%.
- Oregon up 47%
- Indiana up 36%.
Blades notes that if rates continue to rise we can assume that the number of uninsured drivers will also increase.
But increases in uninsured drivers also hit home for individual policyholders. With more uninsured drivers on the road, buying uninsured motorist coverage becomes increasingly important and further adds to consumers’ insurance bills.
States Look To Keep Rates in Check
Some states are introducing new legislation aimed at reducing car insurance costs and protecting consumers.
Georgia Gov. Brian Kemp signed into law HB 221 that keeps car insurance rate increases from taking effect for at least 60 days. This gives the state’s insurance commissioner’s office the ability to review auto insurance rate filings before implementation. Before the law’s effective date, Georgia auto insurance companies could immediately change rates after filing them with the commissioner’s office.
It’s too soon to say how this legislation will impact car insurance rates in the state.
In Colorado, legislation continues to hold insurance companies accountable for testing their algorithms for setting rates and other data systems to show they’re not using unfair discriminatory practices, pursuant to SB 21-169 (signed into law in 2021).
How Colorado car insurance rates could be affected remains to be seen. The insurance commissioner is still working with insurance companies, agents and other parties for the state to adopt rules on how insurers will test and demonstrate that their use of data isn’t unfairly discriminating.
Usage-Based Insurance Adoption Stalling
Most large car insurance companies offer a usage-based insurance (UBI) program—which tracks speed, braking, time of day you drive and other driving behavior—and uses the data to determine your car insurance rates. If you’re an excellent driver, a UBI program may result in a decent discount. However, some insurers raise rates if you’re driving score is poor.
It remains to be seen if 2024 will be the year that UBI really takes off. After a small uptick in UBI adoption during the pandemic, TransUnion reports that interest in UBI is cooling off. Of those who were offered UBI, over half (53%) opted in during the first quarter of 2023. That’s a decrease of 12 percentage points from the same period last year when nearly two-thirds (63%) accepted an offer to try a UBI program, according to TransUnion.
“A lot of consumers are put off by insurance companies collecting all that information about their driving habits. Plus, most states have few regulations and consumer protections around UBI programs. Estimates of participating consumers range from 15% to 25% and haven’t been increasing very much,” says Michael DeLong, research and advocacy associate for the Consumer Federation of America.
While some drivers avoid UBI for privacy reasons, others are embracing UBI for the potential savings it can bring.
“If you are an excellent driver or improve your driving behavior during your trial period, you may be able to save money with UBI,” says DeLong. “Discounts vary by company but they typically range from 10% to 40%, which can be significant. However, keep in mind that these savings come at the cost of giving up a lot of privacy and personal information, so it’s not without risk.”
But there’s also the risk that your rates will increase, which may thwart the growth of UBI. “While most reported being satisfied with their program, over 40% of consumers saw their rates increase, which may hinder continued adoption,” according to a recent Quarterly Shopping List Report on auto insurance by J.D. Power and TransUnion.
How to find the best car insurance in 2024
These tips can help you find the best car insurance company for your needs and budget.
- Look for discounts. Make sure you get all the car insurance discounts and ask about other options you may have, such as going paperless or paying in full for the term of your policy. As prices rise, finding additional ways to save with discounts can help your bottom line.
- Check your car insurance policy. Your preferences may change over the years, so evaluate whether your surroundings still fit. If your car is old and not worth much, it may be time to drop collision and comprehensive coverage. If you’re adding a teenage driver to your policy, increasing your liability limit can be a smart move.
- Shop around. The most effective way to save on car insurance costs is to comparison shop with several companies. Prices for the same cover can vary significantly between car insurance companies. Comparing car insurance rates can pay off significantly due to high costs for insurers’ exact costs.