Why Car Insurance Keeps Going Up Every Year
If you’ve noticed your car insurance bill creeping upward each renewal, you’re not alone. Across the United States and many other countries, average auto insurance premiums have been rising steadily for the past decade. For 2024 the average annual premium in the U.S. sits around $1,850, roughly 6–8 percent higher than the year before. That increase can feel personal, but it’s actually the result of a blend of complex economic forces, industry trends, and changes in driving behavior that combine to raise insurers’ costs — and then, ultimately, rates.
How big is the increase, really?
To make sense of what “going up” means, it helps to look at a longer view. Over the last ten years, average premiums have risen from around $1,200 in 2015 to roughly $1,850 in 2024, an overall increase of about 54 percent. Some states and metropolitan areas have seen even faster growth; urban centers with high crash frequencies and storm exposure have experienced year-over-year increases of 10 percent or more in certain years. While inflation explains part of this rise, many other forces are at work that push claims costs higher at rates exceeding consumer inflation.
| Year | Average Annual Premium (USD) | Year-over-Year Change |
|---|---|---|
| 2015 | $1,200 | — |
| 2016 | $1,250 | +4.2% |
| 2017 | $1,300 | +4.0% |
| 2018 | $1,360 | +4.6% |
| 2019 | $1,420 | +4.4% |
| 2020 | $1,400 | −1.4% (pandemic effects) |
| 2021 | $1,520 | +8.6% |
| 2022 | $1,680 | +10.5% |
| 2023 | $1,730 | +3.0% |
| 2024 | $1,850 | +6.9% |
Seven main reasons premiums rise
Insurance companies raise rates when the money coming in through premiums can no longer reliably cover the money going out for claims, administrative costs, and returns on capital. In recent years the drivers of higher costs have included higher repair expenses, more frequent and severe accidents, the rising cost of medical care, more extreme weather events, increased fraud, higher reinsurance costs, and lower investment returns. Each of these components pushes claims severity up or reduces insurers’ ability to offset losses, leading to rate increases.
“We often think of premium increases as a single lever, but they’re the sum of many smaller pressures,” says Dr. Laura Bennett, an insurance economist at the Center for Risk Studies. “Repair technology has become more expensive, court awards have trended upward in some regions, and even seemingly indirect items like used car prices affect claim payouts. When several of these move together, it creates noticeable upward pressure.”
Repair and replacement costs: cars are getting pricier to fix
Cars today include far more advanced technology than a decade ago. Features such as blind-spot monitoring, lane-keep assist, multiple cameras, and radar sensors have become standard on many models. While these safety features can reduce the likelihood of certain accidents, they are expensive to repair when damaged. An average bumper replacement that might have cost $800 ten years ago can now run $1,800 or more once sensors and cameras are involved.
In addition, labor rates have risen. A typical collision repair shop hourly rate in 2015 averaged about $45–$55; by 2024, those rates can exceed $90–$120 per hour in many areas. Parts shortages and higher parts prices caused by supply chain disruptions have also translated into longer repair times and higher costs. Shops frequently report that parts backorders add days to repair schedules, increasing rental car costs and overall claim amounts.
“Advanced driver assistance systems add real safety value, but they also add expense,” explains Mark Rivera, Vice President of Claims at National Auto Insurance, who has overseen claims for more than 15 years. “Replacing a front bumper that includes radar, cameras and structural sensors is not the same as swapping sheet metal. When you combine higher parts and labor costs with increased frequency in some markets, insurers have to adjust pricing to remain solvent.”
More driving, more accidents
Driving patterns shifted dramatically during the early pandemic, with vehicle miles traveled falling sharply in 2020 and then rebounding in subsequent years. By 2022 and 2023, driving levels in many regions had returned to or exceeded pre-pandemic norms. Higher miles driven typically leads to more accidents, and that is exactly what happened. Traffic fatalities and serious crashes rose in several years following 2020, contributing to higher bodily injury claims and associated medical bills.
Distracted driving, particularly related to smartphone use, remains a significant contributor to accident frequency. Insurers have reported upticks in claims where occupant injury severity is higher, and medical and legal costs for these claims can be substantial. When accidents not only increase in number but also in severity, the net effect is higher claim payouts, which insurers offset through rate increases.
Medical inflation and injury payouts
Medical costs have grown faster than general inflation for many years. A soft-tissue injury that might have been treated with a short course of physical therapy and modest imaging can now involve more diagnostics, longer therapy regimens, and higher hospital charges. When an auto injury escalates into long-term care or involves surgery, claim costs can easily reach six figures.
Sarah Liu, an actuary and director of analytics at ClearView Analytics, notes, “Medical inflation and changes in treatment patterns are major drivers of bodily injury claim inflation. It’s not uncommon for medical cost trends to outpace general CPI by two to three percentage points, and that difference compounds over time in an insurer’s loss ratios.”
Natural disasters and catastrophic losses
Weather patterns have become more volatile, and catastrophes like hurricanes, hailstorms, tornado outbreaks, and flooding have increased both in frequency and in the size of insured losses. A single large storm can generate tens of thousands of auto claims in a short period, driving up overall loss levels for regional insurers and forcing them to raise rates to prepare for future events.
In 2023, insured losses from severe convective storms and hurricanes exceeded $50 billion in the U.S., a portion of which was borne by auto insurers through a surge in comprehensive claims. Insurers often rely on reinsurance to limit exposure to catastrophes, but reinsurance itself has become more expensive, and those costs are passed on to consumers through higher premiums.
Legal environment and jury awards
In some states, the legal environment has shifted in ways that increase the average payout per claim. Larger jury awards for pain and suffering or punitive damages can materially change the economics of liability coverage. Where legal settlements are on the rise, insurers adjust rates to reflect the increased exposure. This effect varies widely by state and is one reason premiums can rise faster in certain regions.
“Jury verdicts and settlement trends are important considerations,” says Carlos Martinez, senior policy analyst at the Consumer Insurance Advocacy Group. “Policyholders in states with higher litigation risk should expect higher premiums. That’s not always intuitive for drivers, but it’s a clear signal in the nation-wide premium divergence we see.”
Fraud and staged accidents
Fraudulent claims and staged accidents also contribute to rising costs. Organized rings that stage collisions or exaggerate injury claims add nontrivial expense to the system. While fraud represents a minority of overall claims, the cost per fraudulent claim can be high and insurers invest heavily in fraud detection and investigation, which increases administrative expenses.
Insurers have devoted more resources to identifying suspicious claims using data analytics and telematics. Those investments can reduce future losses, but they raise operating costs in the near term, affecting premiums.
Investment returns and insurers’ income
Insurance companies historically rely not only on underwriting profits but also on investment income from their reserves. When interest rates are low, insurers earn less on invested premiums, which can prompt them to raise underwriting rates to meet profit and solvency targets. Conversely, when investment returns are strong, insurers can hold rates lower. Over the past decade, shifting monetary policy has created periods of both low and higher rates. The interaction between investment income and underwriting pricing continues to influence premium levels.
“Insurance is both a product and an investment portfolio,” explains Dr. Bennett. “When yield curves compress, carriers have fewer levers to absorb underwriting losses. In that environment, rate increases are a primary mechanism to restore margin.”
How insurers decide new rates
Rate-setting is part art and part science. Actuaries analyze historical claims, adjust for current trends, project future costs, and file rates with state insurance regulators. Insurers consider loss development patterns, economic inflation, medical trend, repair severity, and catastrophe exposure. They also account for company-specific metrics such as loss ratio targets, expense loads, and required return on equity. If the projected losses exceed the expected premium intake, insurers will seek to increase rates to ensure long-term solvency.
Rate filings often include complex actuarial exhibits and are reviewed by regulators who may approve, disapprove, or negotiate changes. The timeline between recognizing rising costs and obtaining rate relief can be months or even years, which sometimes leads companies to implement temporary surcharges or adjust underwriting standards as interim measures.
| Primary Cost Driver | Estimated Contribution to 2024 Increase | Typical Dollar Impact on Annual Premium |
|---|---|---|
| Repair and parts inflation | ~30% | $150–$300 |
| Medical cost inflation and injury severity | ~25% | $120–$250 |
| Increased driving and accident frequency | ~15% | $70–$140 |
| Severe weather and catastrophes | ~10% | $50–$110 |
| Fraud and administrative costs | ~8% | $30–$70 |
| Reinsurance and investment environment | ~12% | $70–$160 |
Why some people see big jumps and others only small increases
Not every policyholder experiences the same rate movement. Insurers price policies based on individual risk factors, so a driver with a clean record, good credit, and a low-risk vehicle may see only modest increases, while someone in an urban ZIP code who recently had a claim might see a substantial jump. Geographic differences, company pricing strategies, and the mix of risk within an insurer’s book also influence how much each customer pays.
Age and vehicle choice also matter. Young drivers and drivers of sports cars typically pay significantly more because their historical loss frequency and severity are higher. Conversely, drivers who choose vehicles with strong safety ratings and lower repair costs often enjoy lower premium inflation over time.
“When you average across a company’s portfolio, you see the macro increases I discussed earlier,” says Sarah Liu. “But on the individual level you might see smaller or larger changes depending on your exposure. That’s why shopping around periodically can reveal meaningful savings for some consumers.”
Real examples: how an individual’s premium can change
Consider a 35-year-old driver living in a mid-sized city who had no claims in 2023 and paid $1,500 for full coverage. If that insurer raises rates by the national average of 6.9 percent in 2024, the premium becomes approximately $1,604. If that same driver moves to a metropolitan downtown neighborhood with higher theft and accident rates, or is involved in a minor claim that moves their claims history into a higher tier, their insurer might impose a 15–30 percent surcharge, pushing the premium to $1,740–$1,960.
On the other hand, a driver who installs a telematics device and demonstrates safe driving might receive a 10–20 percent discount from a supportive insurer, offsetting the broad market increase. These individual moves show why personal actions and insurer programs matter alongside the macro trends.
What insurers are doing to manage rising costs
Insurance carriers have several avenues to respond to rising claims costs. They can increase premiums, tighten underwriting standards, reduce some discounts, increase deductibles, or invest in loss control and fraud detection technologies. Many companies are expanding telematics programs, which reward safe driving behaviors and allow more precise pricing. Others are negotiating with repair networks and suppliers to control parts and labor costs more efficiently.
“We’re investing heavily in predictive analytics to identify high-risk patterns early,” says Mark Rivera. “Better data allows us to be more surgical about pricing and interventions, rather than broad rate increases across the board. That benefits both the insurer’s bottom line and the consumers who drive safely.”
How to limit the impact on your wallet
While many of the causes behind rising premiums are outside any single driver’s control, there are practical steps consumers can take to reduce the impact. Start by shopping your policy around every 12 to 18 months. Price differences between companies for similar coverage can be substantial. Ask about available discounts for safe driving, multi-policy bundling, low mileage, and loyalty programs. Increasing your deductible can lower annual premiums, though it increases your out-of-pocket risk in a claim. Installing approved anti-theft devices and choosing vehicles with strong safety and repairability ratings can also yield lower premiums over time.
Telematics or usage-based insurance programs can deliver immediate savings for low-mileage and safe drivers. Participating in a program for six months to a year can result in significant discounts for many drivers. Additionally, maintaining a strong credit profile matters in most states where credit-based insurance scores are permitted. A single missed payment can increase your score’s risk signal, so consistent financial management helps both your household budget and your insurance costs.
“Consumers have more power than they sometimes realize,” says Carlos Martinez. “A well-timed quote review, stacking discounts, and considering a safe and low-cost vehicle can mitigate a lot of the pressure from market-wide increases.”
Regulatory protections and what to watch for
Insurance rate changes are regulated at the state level in the U.S. Most states require insurers to file rate changes and supporting actuarial data with the insurance department. Some states allow open public comment or hearings before approval. If you believe a proposed rate is excessive, you can often submit comments to your state insurance regulator. Consumer advocacy groups also monitor filings and, in some cases, intervene or request additional scrutiny.
When rates rise significantly in your area, it’s often worthwhile to check the regulator’s website to see whether the increase was filed and supported by detailed analysis. If you think your insurer applied a surcharge improperly after a claim or an inaccurate factor influenced your renewal, you can ask for an explanation from the company and file a complaint with your regulator if needed.
Looking ahead: will premiums keep rising?
Predicting the precise path of premiums is difficult because multiple uncertain factors are involved. If repair costs continue to climb, if medical inflation remains high, and if severe weather events persist or escalate, we can expect pressure on rates to continue into the next several years. Conversely, if supply chains normalize, used car prices stabilize, and technology lowers accident frequency substantially, those positives could dampen the trend.
Actuarial forecasts for 2025–2027, assuming no large new catastrophes and moderate inflation, project annual increases of roughly 3–6 percent per year on average. That projection assumes continued investment returns that are at least modestly positive and no major legislative changes that would alter litigation or medical cost patterns. The industry is actively focused on both mitigating losses and adopting technologies that can reduce accidents and repair costs long term.
Final thoughts: a shifting balance between cost, safety and technology
Rising car insurance premiums reflect a complex interaction of safety improvements, changing driving habits, economic forces, and environmental risks. Many modern car features make driving safer but can produce higher repair bills when accidents occur. Medical and repair inflation, more frequent severe weather, and litigation trends have a direct effect on what insurers pay out, and that ultimately shapes what consumers pay in premiums.
While macro trends are powerful, individual consumers can take concrete steps to reduce their exposure to rising costs. Comparing quotes, optimizing coverages, taking advantage of discounts, participating in telematics programs, maintaining good driving and credit records, and choosing vehicles wisely are all effective actions. Understanding the reasons behind premium increases can help you feel less blindsided the next time you see your renewal and better prepared to manage your insurance wallet.
“There’s no single cause for premium increases, and there’s rarely a single fix,” Dr. Bennett concludes. “Where consumers do win is by staying informed and strategically managing their own risk profile. Over time, safer driving, better choices, and market competition will keep upward pressure in check.”
“Insurance reflects the real cost of risk,” adds Mark Rivera. “That can be uncomfortable, but it’s also a sign that the system is responding to measurable changes. The best approach is a blend of personal risk management and active shopping.”
“Regulators, insurers, and consumers all play a role,” Carlos Martinez summarizes. “Transparency in rate filings and competition in the marketplace are essential to ensure that premium increases are fair and justified.”
By understanding the drivers of cost and taking sensible actions, drivers can navigate the rising tide of premiums with less surprise and more control over their insurance expenses.
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