What's driving up car insurance prices?
MINNEAPOLIS — As inflation cools, the cost of owning a car keeps accelerating.
New numbers out on Wednesday show prices on all items rose about 3% year-over-year last month. But car insurance prices jumped a whopping 20%.
Any good news about inflation is quickly dampened when you ask people about their car insurance. Premiums have been causing sticker shock to drivers renewing their coverage
"I thought this is too much, so I got in line with my company and started looking for ways to reduce their risk and increase mine," said Edina resident William Kittleson.
Aaron Cocking, president of the Insurance Federation of Minnesota, says the rate increases being seen now are from the impact of the last two years of inflation, which hit everything auto insurance covers: parts, labor and even medical bills covered in collisions.
"Those were costs that hadn't been factored into insurance rates. Now that insurers have paid those losses at those higher numbers, those have gone through the process, have been factored into rates, have been approved. That's why consumers are now seeing those higher rates," Cocking said.
The cost of covering and replacing cars was also more expensive for insurers as auto thefts in some cities hit new records.
"If you've got more cars being stolen than insurers had kind of anticipated, or kind of factored in, as we have those higher rates, that's all going to have to be compensated in the form of higher premiums," Cocking said.
Experts say there are some ways you can save:
- If you work from home you may qualify for a low mileage discount
- Bundling car and home insurance together can lead to a better rate
- Car owners should examine their policy to see if they can drop parts of it, like car rental insurance or towing insurance
Despite the price pressure, Cocking says it's important to remember not having insurance isn't just illegal, but it could leave you in a deep financial hole.
"If you don't have insurance, it's not that they're not compensated from you," he said. "They can come after your future earnings, they can come out after whatever assets you have. Insurance really is a way to protect you and to protect your assets."
