Americans are paying less for gas compared to last year, but any money saved is likely being used up by higher car insurance costs.
In December, gas prices were almost 2% lower than the previous year, but auto insurance rates increased by 20%, according to Labor Department data released on Thursday. This rise in insurance costs is six times higher than the overall increase in consumer prices last year.
Other data indicates an even bigger jump in car insurance premiums. In 2023, the average annual rate for full auto coverage in the U.S. went up to $2,019, which is a 24% increase from $1,633 in 2022 and almost 29% from $1,567 the year before, according to Insurify, an insurance comparison site.
The minimum required coverage by states also increased to $1,154 in 2023.
Why Are Car Insurance Rates Going Up?
Several factors contribute to the increase in car insurance costs, including lingering effects of the pandemic. Cars are more expensive and pricier to repair due to inflation affecting the cost of computer components and other repair parts.
A shortage of mechanics across the U.S. means longer repair times, leading to higher expenses for insurance companies covering rental cars for customers while their cars are being fixed.
Climate change is also a factor, as extreme weather damages more vehicles, resulting in more claims and higher premiums.
Additionally, insurance companies are facing rising medical, legal, and operational costs, according to Greg McBride, chief financial analyst at Bankrate.com.
After Allstate threatened to stop offering auto coverage in three states due to heavy losses, New Jersey approved a 17% average increase in auto rates in December. New York allowed a 15% hike, and California regulators permitted Allstate to increase auto rates by 30%, as reported by the Wall Street Journal.
Most Expensive States
Insurify’s data shows that New York drivers pay the highest car insurance premiums, with an average of $3,374 per year for full coverage, equivalent to $281 per month. According to the enterprise, the following states complete the top 10 when sorted by average yearly premiums:
- Nevada—$2,975 per year ($240/month)
- Florida—$2,917 $243/month)
- Delaware—$2,806 ($234/month)
- Louisiana—$2,792 ($233/month)
- Washington, D.C.—$2,756 ($230/month)
- South Caroline—$2,680 ($233/month)
- Maryland—$2,645 ($220/month)
- Michigan—$2,640 ($220/month)
- Rhode Island—$2,452 ($204)
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