Why Did My Car Insurance Go Up For No Reason?

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The bottom line

Having your car insurance go up can be frustrating and annoying, especially if you’re unsure why. You might wonder why does my car insurance keep going up and think it’s something you did. But as you can see, even if you have a stellar and spotless driving record your car insurance can go up for many reasons that don’t have to do with you. Risk assessment and insurance are complex and it’s not as cut and dry as you might think. If you want a low car insurance rate and don’t drive that often, you can score competitive rates with pay-per-mile insurance with Metromile. Get a quote today to see about potential savings.

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What Other Factors Increase Your Car Insurance Premium?

Other factors, some beyond your control, may also lead to a rate increase. 

  • Change in marital status: Statistics show that single drivers file more claims than married ones. Your rate may go up if you divorce and, in some cases, after a spouse dies.
  • Adding drivers to your policy: If you add a new spouse or a teen driver to your auto insurance policy, the company may increase your premium. 
  • Change in gender marker: Female drivers tend to have fewer traffic accidents than males. If you change your gender marker from female to male, the insurer may increase your rate.
  • Your location: If claims for collisions, weather-related damages, auto theft, or vandalism increase in your ZIP code, your provider may raise your premium.
  • Your car’s make and model: If a spike in claims of your car’s make and model occurs, your carrier may increase your rate.
  • Your age: Most often, younger drivers pay higher insurance rates. While your rates may decrease as a young adult and when you reach middle age, they may increase when you reach your 60s.
  • Lost discounts: If you’ve earned a good-driver discount and have an accident, receive an employer discount and change jobs, or cancel a policy for which you receive a multipolicy discount, your car insurance rate may increase. 
  • Across-the-board rate increase: Insurance companies may increase the rates of all of their policyholders for various reasons. These include an increase in claims, the number of cars on the road, or more accidents involving injuries and fatalities.

2. A lower credit score

In most states (currently excluding California, Massachusetts and Hawaii), auto insurers factor in not just your habits on the road but also your credit-worthiness when considering premium rates.

As Cover recently reported, 95 percent of auto insurers use credit history in their underwriting decisions. So even if you have a clean driving record, a poor credit score might push up your rates.

Shockingly, a low credit score might affect your insurance rates even more than a DUI.

Estimates suggest your average annual rate might increase approximately 27 percent if your credit score goes from excellent to fair. If your score drops from excellent to poor your rate could double.

Consumer advocates have come out against this practice. It may discriminate against those with lower wealth and education levels, and disproportionately affect minorities.

A Low Credit Score

It’s the global tradition for lenders to evaluate your credit score before determining your loan repayment ability. And as it turns out, the trend is now widespread in the auto insurance space. The insurance companies have concluded that clients with low credit scores are more likely to be involved in accidents. Therefore, they charge rates depending on the credit score as well.

Luckily, states like California bar insurance companies from using a customer’s credit scores to set the premium rates. Nevertheless, you have one more solid reason to improve your credit score.

Can My Car Insurance Rates Go Up If I Didn’t Cause the Accident?

Car insurance rates generally go up only when you cause a car accident that results in damage or injuries to others. Here are some examples of car accidents that won’t lead to a rate increase:

  • Your car was struck in a hit-and-run accident.
  • Your car was legally parked when it was damaged.
  • Your car was struck in the rear by another vehicle and you were not convicted of a moving traffic violation in relation to the accident.

See more examples of car accidents that won’t make your insurance go up.

If you’re involved in an accident, your car insurance company might require proof that you weren’t to blame Here are some examples of documents you can gather:

  • A police report about the accident
  • A statement from the other driver’s insurance company accepting fault
  • Another driver’s written statement, under penalty of perjury, attesting to fault
  • A legal document showing that you were reimbursed for accident damage

Also, accident claims paid by comprehensive insurance generally don’t result in a rate increase. These include collisions with animals and damage caused by falling or flying objects (like gravel or road debris).

Nonetheless, comprehensive claims are recorded in your claims history. Insurers generally consider drivers with a history of claims to be more likely to file future claims, which can translate into higher car insurance premiums.

Your Car Type

If you’re searching for a new car, things such as comfort, styling, size, and fuel economy are your top priority. But they come at a cost because it’s now a proven myth that your overall car valuation will determine how much you pay for the premium rates.

To begin with, the size of your car will matter a lot when buying auto insurance, states Policygenius. Generally, most people think that smaller vehicles such as sedans are more maneuverable and, thus, more likely to cause accidents. This is even backed up by statistics that prove smaller and sportier vehicles are driven at higher speeds and by younger, riskier drivers. So, because these cars are likely to be involved in more accidents, they also become more expensive to insure.

But big car owners are also not spared as well because big motors will attract more significant rates. Big SUVs, sports cars, and trucks are known to have more horsepower. That means your vehicle is likely to move at faster speeds, hence the risk of causing an accident. Therefore, to be safe, shop around for the cheapest insurer.

Why are auto insurance rates increasing?

Car insurance rates are calculated based on a number of underlying factors. Individually, your age (in all states except Hawaii and Massachusetts), gender (in most states), driving history, vehicle type and coverage choices impact your premium. Additionally, broader factors also impact rates, such as if states pass revised insurance laws, the likelihood of claims occurring in certain areas or if vehicle repair costs increase.

Inflation

Perhaps the biggest driver of higher 2022 car insurance premiums is inflation. Between December 2020 and December 2021, the Consumer Price Index (CPI) rose 7.0%. This means that, on average, we are spending 7.0% more than we were a year ago for the same goods and services.

Inflation pounded the new and used vehicle markets in 2021. The price for new cars and trucks rose by 11.8% between December 2020 and December 2021, while the used car and truck market saw a staggering 37.3% increase. Vehicles are also much more complex than they used to be, which adds to the overall cost of ownership. Even small accidents can cause hundreds or thousands of dollars worth of damage to delicate electronics that require specialized repairs.

Vehicle costs aren’t the only thing struck by inflation. The cost of healthcare is also on the rise. The Centers for Medicare & Medicaid Services reports that healthcare spending increased 9.7% in 2020, the most recent year with available data. This means that when someone is injured in a car accident, the resulting medical costs are greater than what they were in previous years.

Because car insurance is designed to pay for the costs after an accident — including both property damage and medical costs — anything that raises these costs is likely to raise rates. Insurers need to make sure they have enough funds to pay claims, so when inflation hits, car insurance rates are affected.

Supply chain disruptions

The last few years have created a perfect storm to disrupt supply chains. COVID-19 shutdowns caused decreasing demand in certain industries in 2020. With fewer people on the road and cars generally getting less use, there was a decrease in the need for vehicle parts. Then, an ice storm in February 2021 knocked out plants and factories across the South, the Suez Canal was blocked for six days in March 2021 and people began to return to a more normal level of driving, which caused increased demand but decreased supply. The auto industry has been one of the hardest-hit sectors. “Parts are more expensive, labor is more expensive and repair costs overall are more expensive,” Ellis says.

Perhaps the most evident of these vehicle-related supply chain disruptions was the difficulty in obtaining semiconductors. Semiconductors, often called “chips,” are used in a wide array of vehicle applications, including driver assistance systems, entertainment systems and electronic mechanisms. In December 2021, over 50 business leaders — including executives from American Honda Company, Ford Motor Company, General Motors and Toyota Motor North America — sent a letter to Congress urging the governing bodies to encourage the U.S. to create its own semiconductor research, design and production methods, to increase the supply of semiconductors and available jobs.

Labor shortages

Along with supply chain issues making parts harder to find, labor shortages have made skilled workers harder to find as well. The Bureau of Labor Statistics reports that unemployment is at 3.9% as of December 2021 — sharply down from the April 2020 peak of 14.7%, but not yet back to pre-pandemic levels of 3.5%. The “Great Resignation” has also pushed workers to reconsider their career paths, with many labor shortages caused not by unemployment but by workers switching jobs.

Fewer workers can contribute to rising insurance costs. When fewer people do any given job, including vehicle repair and healthcare jobs, pay rates often increase as an incentive. For example, perhaps a mechanic used to repair bumpers for $100. Now, that same mechanic is working longer days and taking less time off to make up for a reduced workforce. To compensate, the mechanic now charges $300 to cover the same repair. Because the repair costs more, insurance companies may increase rates to prepare for higher claims expenses.

Changing driving habits

As we hunkered down at the start of the COVID-19 pandemic in early 2020, the country saw an unprecedented reduction in driving levels. Many households stopped commuting to work, school and activities. Streets were quieter and accidents were fewer. As a result, many insurance companies refunded some premiums to policyholders.

However, Friedlander points out that

“In 2021, we saw a return to pre-pandemic driving patterns which led to a significant increase in auto insurance claims and accident severity. In fact, the National Highway Traffic Safety Administration reported an 18.4% increase in fatal crashes during the first six months of 2021 compared to the first six months of 2020 — the highest percentage increase on record.”

This pendulum swing of driving habits may mean insurance carriers need to rebuild their claim reserves — the money set aside and earmarked for paying losses — which could mean higher premiums.

What determines car insurance rates?

Car insurance rates are based on a number of factors not directly related to your policy, including your location, age, gender, and marital status. Data about how often people in these different demographics have accidents will influence your rates. In terms of direct factors, your type of vehicle, coverage limits, deductibles, driving, and claims history all play roles. Your insurance carrier may also discount your rates if you purchase multiple types of coverage.

11. Smoking gun?

While this factor will currently affect only an extreme minority of drivers, Lynch says it’s worth noting that, if you live in a state that has recently legalized recreational marijuana use, your premium could see a second-hand effect.

“This is only an issue,” he notes, “so far as we know in the states that legalized cannabis for recreational use a couple of years ago [ Colorado, Washington, Oregon], but it is an important one there. Something similar can be expected in states where recreational sales have just begun or are about to begin – Nevada, California, Massachusetts.”

In all three states that first legalized marijuana, “the advent of the legal retail sale of marijuana is correlated with increases in collision claim frequency,” according to a 2017 report from the Highway Loss Data Institute.

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