Here Is Why Premiums Are Rising for Almost Everyone
If you’re suffering from sticker shock when you open your auto insurance bill each month, you’re not alone.
Many drivers, even ones with spotless records, have generally seen their car insurance premiums increase.
So what’s driving up rates? A combination of factors, from more accidents caused by busier freeways and an increase in distracted driving to the higher cost of medical and repair bills.
Remember, when you’re paying your insurance, you’re not paying for yourself alone. All of the premiums are pooled together to cover the losses of policyholders who are involved in accidents. If costs increase in any one area, that will hit every insurance policyholder collectively in the pocketbook.
1. More Accidents
For years, fatal accidents on the nation’s roadways had been on the decline. Unfortunately, that’s no longer the case.
An estimated 42,915 people were killed each year in 2021, up 10.5% in 2020 and the highest number since 2005, according to the National Highway Traffic Safety Administration.
Washington state has seen a similar rise in fatalities. In 2010, 460 people were killed on the state’s roadways, according to the Washington Traffic Safety Commission. That number rose for three consecutive years from 2019 to 670 in 2021.
Nationally, 4.57 million people were injured enough in car accidents to require medical attention in 2017, according to the nonprofit National Safety Council. Those accidents cost $413.8 billion in damages and medical bills.
Another way to look at it is that one in five people have been in an accident serious enough that someone had to be treated at a hospital, according to 2018 report from the AAA Foundation for Traffic Safety. And one in three people are related to someone killed in an auto accident.
One of the reasons that there are so many accidents is that more people are putting in more miles behind the wheel. Drivers logged a record 3.2 trillion miles in annualized monthly numbers in 2018, according to the U.S. Federal Highway Administration. Just 20 years ago, that was 2.5 trillion.
2. Distracted Driving
There’s no doubt about it, distracted driving is contributing to the increase in accidents. Head out on any freeway and you can soon see another driver fiddling with their phone.
Although cellphones have been around for decades, smartphones that allow people to text, check emails and browse the internet have really taken hold over the past decade.
In 2011, just 35% of Americans owned smartphones, according to the Pew Research Center. That percentage increased to 77% in 2018.
While that’s made for a more connected world, it’s also made for more dangerous roads.
The number of drivers who report talking on a cellphone regularly when behind the wheel has jumped 46% since 2013, according to the AAA Foundation for Traffic Safety.
Nearly half of all drivers reported recently talking on a hand-held phone while driving and nearly 35% have sent a text or email.
A separate study from the AAA Foundation found that drivers talking on a cellphone are up to four times as likely to crash while those who text are up to eight times as likely to be involved in a crash.
Drivers told AAA that they believe the problem of distracted driving has increased over the past three years. About 50% reported regularly seeing other drivers emailing or texting while driving. Federal estimates show that the number of distracted driving crashes has dropped 2% in that time.
Researchers at AAA suspect that may be because it is difficult to detect distracted driving after the fact. The federal government estimates that distracted driving played a part in just 14% of all accidents.
But in a study of teen drivers, AAA researchers using in-vehicle dash-cam videos found that distraction was a factor in 58% of crashes.
3. Higher Costs
When an accident occurs, car insurance typically covers medical and the repair bills. Both are increasing rapidly.
In 2015, 2.5 million people involved in traffic accidents needed to be treated in an emergency room, according to the Centers for Disease Control and Prevention.
The cost of that treatment is escalating rapidly. According to one study, the cost of emergency-room visits rose 31% from 2012 to 2016.
The cost of staying overnight at a hospital is also increasing. In 2013, inpatient costs went up $200 a night for nonprofit hospitals in Washington state between 2013 and 2016. (The same cost for for-profit hospitals stayed about level.)
Cars and trucks are increasingly getting more expensive. That means repairing them is getting more expensive, too.
The cost of the average mechanic bill increased to $2,927 in 2017, up 2% from the year before, according to auto industry trends publication CCC. And that’s on top of continuous growth over the past decade.
Ironically, one of the things that’s causing higher repair bills is safety equipment on modern vehicles, according to a recent study from the AAA Foundation. This safety equipment includes automatic emergency braking, blind-spot monitoring, lane-departure warning and others.
The AAA study found that vehicles with this equipment can cost twice as much to repair because of expensive sensors and calibration requirements.
All of these factors and more come into play. That is why your insurance premium can increase even if you have kept your driving record free of accidents and claims.
–Written by Jim Davis, last updated in January 2023.