To say the United States economy is a mess right now may be an understatement. People have to pay more for just about everything, including new cars while living off a relatively unchanging income amid the constant inflation rate. New car prices cost people upwards of a thousand dollars per month, but that’s not the only obstacle for consumers. Auto insurance has also seen price increases over the past couple of months.
Auto Insurance Premiums Skyrocket 20 Percent
According to Reuters, consumer prices rose 3.4% in December compared to earlier in the year. There are two main factors: high shelter costs, which account for nearly two-thirds of the increase, and the highest annual increase for car insurance in almost half a century. Motor vehicle insurance premiums skyrocketed by 20.3% in December, the most significant growth since the mid-1970s.
Premiums rose persistently throughout 2023, increasing as much as 1.5% last month. This remains consistent with the average monthly increase over the previous year, meaning we’re not seeing any ease-up to car insurance rates. By comparison, this rate exceeds all monthly increases before the pandemic. The wildest thing about this is that auto insurance is rarely registered as a significant influence on overall inflation. Still, it has accounted for 15% of headline price increases over the final quarter of 2023.
Contributors towards the increase in car insurance prices could be due to a number of causes, including the increasing cost of labor and parts to repair damaged vehicles, along with the overall rise in vehicle prices over the last couple of years, which also increases the underlying collateral being insured. It’s unclear how long these factors will continue to increase, but there doesn’t appear to be any sign of things slowing down. It’s also unclear how significant of an effect insurance costs could have on inflation and the disruption it could have for Federal Reserve interest rate cuts later this year.