Car Insurance Prices Are A Major Factor In Recent Inflation Surge: Report

Photo: Logan Cyrus (Getty Images)
Photo: Logan Cyrus (Getty Images)

The average new car transaction price in August — $48,451 — was down 2.4 percent from the start of 2023, marking the largest decrease in the last decade. That’s a great reprieve from the soaring heights of early this year, but current prices are basically identical to what they were in August last year. So while new cars are still quite pricey, they weren’t a factor in last month’s 3.7 percent inflation numbers. Likewise, used car index prices declined 1.2 percent. But car insurance, however, is another story altogether.

According to reports from Axios and NPR, auto insurance prices are rising at the fastest pace in over four decades. In the prior 12 months ending in August, auto insurance rates have jumped 19 percent. Between July and August alone car insurance rates prices rose by 2.4 percent. While car insurance isn’t typically a large line item on a household budget, it’s certainly becoming increasingly moreso.

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“We see a lot of hail damage,” Grace Arnold, Minnesota Commissioner of Commerce told NPR. “We consistently have billion-dollar storms in Minnesota, even if they don’t have the 24-hour hurricane watch ahead of them,” she added.

According to the Insurance Information Institute, auto insurers in the U.S. have paid out about $1.12 in claims in 2022 for every dollar collected in premiums. Insurance companies take your premiums and invest large quantities to cover the difference and turn a profit. So when insurance companies see more costly accidents, more expensive and frequent natural disasters, inflation, and their investments don’t cover the gap, they’re forced to raise prices. And there’s nothing we can do about that. It seems things will only continue to get worse.

Car insurance — all insurance, really — is little more than gambling, and the house (in collaboration with the government) is forcing you to raise your bets to cover their losses. You aren’t legally allowed to drive without placing a bet, so your only recourse to the high cost of insurance is to move to another casino. You can slightly lower your monthly bets if you want to accept a smaller payout in the event of an accident, storm, or theft. I guess it all depends on your risk tolerance.

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