What You Need to Know About Car Insurance Rate Increases in 2022

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Updated May 13th, 2022
woman stressed about cost of car insurance in 2022

In November of 2021, Progressive and Allstate increased rates between 3 and 12%, reports S&P Global Market Intelligence. And those prices will just keep going up this year. According to CNBC, car insurance rates are predicted to increase by 5% in 2022. 

While rates are going up, there are still ways to get good deals or even avoid the rate increases entirely. 

3 Factors Driving the Car Insurance Rate Increase

Multiple factors are currently contributing to the increase in car insurance rates. Here are some of the primary ones.

The Pandemic

Keep in mind that when social distancing was at its peak and most events were canceled, there were few drivers on the road, which meant there were also fewer accidents. Insurance companies passed these savings onto their customers by offering discounts to those who drove minimally, and by avoiding increasing rates. 

Now that more events are being held and more people are again commuting to work, there are more vehicles on the road and the risk of accidents has increased. In fact, the National Highway Traffic Safety Administration reports that in the first half of 2021, the fatality rate for traffic accidents increased to 1.34 fatalities per 100 million accidents. That was an increase from 1.28 fatalities per 100 million accidents in the first half of 2020. 

Insurance companies are resuming the standard rate increases that we got a break from for a couple of years during the pandemic, but they also need to make these increases so that they can pay for the increased accidents that are occurring. 

Inflation

Increasing prices all around are also driving these necessary rate increases. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index increased by 7% from December of 2020 to December of 2021. That increase means that goods and supplies cost, on average, 7% more now than they did at the end of 2020. Those price increases affect metal, rubber, and other materials, meaning that the cost of replacement vehicle parts and vehicle repairs are higher now, too. 

And don’t forget about the increased value of vehicles, themselves. If you’ve tried to shop for a vehicle in the past two years, then you already know that vehicle prices are sky-high. According to Car and Driver, average prices for new vehicles rose by nearly $1,800 in 2019, by $3,301 in 2020, and then by $6,220 in 2021. Those prices are driven by supply-chain issues, the pandemic, a chip shortage, and increasing material costs. As a result, it’s more expensive than ever to buy a new vehicle. If your car is totaled, your insurance company has to cover that cost, so they need to raise premiums to justify that increased risk. 

Labor Shortages

Even the current labor shortages are driving prices up. For example, the healthcare industry faces a significant nursing shortage. To make up for lack of staff, a hospital might rely on staff working overtime for increased wages, or they might work with a staffing agency and pay more to bring on additional staff. Those increased staffing costs mean that healthcare costs increase, too. Since many insurance policies include coverage for medical bills, insurers need to increase rates to make up for these increased potential costs that they’re now responsible for. 

The same is true of vehicle repair costs. That labor shortage affects garages and mechanics in the same way it affects hospitals. Garages may need to pay more to get the staff help that they need, and those costs are reflected in increased repair costs. 

Will Your Car Insurance Rates Increase in 2022? 

While car insurance rates are increasing, that doesn’t guarantee that you will see your rates go up in 2022. Many factors affect your car insurance rates, and if you’ve experienced changes that can affect those rates, it’s possible that your rates will decrease. 

For example, your location affects your rates. If you previously lived in a city, chances are you were paying more for car insurance because of the increased chance of being in an accident, thanks to all of that traffic. But if you relocated to a more rural area with less traffic, your rates could decrease because of the reduced risk of being in an accident. 

Even moving to a different state could prompt a rate decrease. Rates can vary significantly from state to state. States like Idaho, Iowa, South Dakota, and Maine have some of the lowest average monthly premiums, while you’ll pay some of the highest average monthly premiums if you live in Michigan, Louisiana, New York, or New Jersey. If you’ve moved to another state, you might have lowered your rates so much that you won’t even see an increase this year. 

Strategies to Avoid Insurance Rate Increases

man talking on the phone about how to keep his auto insurance rates low

If you’re worried about your rates increasing, you can take multiple steps to help keep your car insurance affordable.

Work with Your Current Insurance Company

One of the first steps to take is to call your current insurer and ask about their planned rate increases. Be sure to ask about any discounts that your insurer offers, like multi-vehicle discounts, multi-policy discounts, or discounts for taking a safe driving course. You may be able to lower the cost of your insurance by taking advantage of discounts that you weren’t aware of. Ask if your insurance company offers any sort of an app-tracking opportunity, where you allow an app to track your driving habits and are eligible for discounts for good driving habits. 

If you find that your insurance rates are too high for you to afford, you might want to explore changing your coverage or increasing your deductible. Lowering your coverage will reduce your rates, but keep in mind that with less coverage, you could be responsible for any expenses that aren’t covered. 

The same is true of increasing your deductible. When you agree to a higher deductible, your monthly payments will be decreased. But if you ever need to file a claim, you’ll be responsible for that higher deductible when repairing or replacing your vehicle. Make sure that you’ll be able to pay that larger amount and that you’re comfortable taking that risk before increasing your deductible. 

Carefully Make Vehicle Purchases

If you’re planning on buying a vehicle, you may want to consider these higher insurance rates when you shop around. A brand-new vehicle with a higher value can drive your rates up significantly. Buying a used vehicle might be a better option if you want to keep your premiums low. 

Keep in mind that the make and model vehicle you buy will also affect your rates. Some makes, like Mercedes-Benz and Tesla, are more expensive than other vehicles, and they also cost more to repair. A more expensive vehicle model will drive up your rates. 

Make Yourself a Low-Risk Driver

The riskier that you are to insure, the higher your insurance premiums will be. You have some control over the elements of your life that an insurer considers to be risk factors. 

Some insurers use your credit score as an indicator of how risky a customer you are to insure. If you have a lower credit score, insurers may consider you to be a higher risk driver and increase your rates. Building good credit takes time, but making all of your payments on time, using as little available credit as possible, and steadily paying down your balances can all help to boost your credit score. 

A history of at-fault accidents and traffic violations also indicates that you’re a high risk driver and can increase your rates. If you don’t have a perfect driving record, start working on improving it. Follow driving laws, including speed limits, to reduce the chance of getting a ticket. Focus on safe driving habits to avoid at-fault accidents, and with time, your record will increase and you may see rate decreases. 

Look for a New Insurance Company

This is also the perfect time to shop around for new car insurance. You may be able to find lower rates from other car insurance companies. 

To find the best policy with the best rates, you’ll need to compare quotes from multiple companies. That’s easy when you use Compare.com. Just fill out the quote request form, which takes about five minutes, and you’ll receive personalized quotes from up to 65 insurance companies. Comparing the quotes is easy, and you can see which policy gives you the best value. 

Compare.com users save an average of $720 per year on their car insurance, and the process is easy and fast. Taking just a few minutes to shop around might save you money and help you avoid the insurance increases that are coming this year.

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