Outlook for car insurance in 2024

Key points

• Experts expect car insurance rates to continue to rise in 2024. 
• Replacement costs will continue to affect future car insurance rates, as insurers adapt to a 45% cost increase from 2020 to 2023. 
• Increasing natural disasters, medical claims costs and vehicle thefts will also contribute to car insurance premium increases. 

Car insurance rates are expected to keep accelerating upward, so brace yourself for your next renewal bill. An increase in auto theft, climate-driven disasters, inflation and expensive car accidents are fueling higher car insurance costs in 2024. Learn more about the major factors driving car insurance costs higher and how to find the best car insurance in 2024. 

Car insurance rates will continue to rise in 2024

Consumers shopping for the best car insurance in 2024 can expect higher prices, according to Mark Friedlander, Director of Corporate Communications at the Insurance Information Institute (Triple-I). 

“Car insurance rates are expected to continue to increase in 2024 due to costlier repairs, driven by parts shortages and higher costs of labor, as well as low inventories of vehicles, which generates higher costs of replacing totaled cars.” 

Mark Friedlander, Triple-I

Friedlander went on to highlight parts and replacements as another pain point for the auto industry. “From 2020 through 2023, replacement costs increased an average of 45% cumulatively, whereas inflation for the overall U.S. economy increased 15% within the same time frame.”

Previous losses will lead to higher premiums, he continued. “The U.S. auto insurance industry is expected to post a substantial underwriting loss in 2023 with a 110.5 combined ratio, meaning they are paying out $1.10 for every dollar collected in premium.” 

Anticipated rate increases are coming on the heels of 2023 cost trends. 

Car insurance rates are up 18.9% year-over-year according to Bureau of Labor statistics. As Friedlander indicated, replacement and repair costs are driving that increase, but they aren’t the only factors at play. Rates are also rising because of:

• Higher crash severity. While the number of crashes has been on the decline since 2021, speed-related fatalities reached a 14-year high. Higher-speed crashes are often more severe and lead to more claims litigation.
• Severe weather. Tropical cyclones cost insurance companies millions of dollars in losses, and to make up for these losses, insurance companies have to increase premiums in the succeeding years. 
• Increase in auto thefts. Vehicle theft rates reached near-record highs in 2022, vehicle theft increased by 7% year-over-year, according to the National Insurance Crime Bureau, and the trend continued in the first half of 2023. More thefts mean more comprehensive claims for insurance companies, losing the money they earn from premiums.
• Higher medical expenses. Medical costs are also on the rise. For auto insurers, that means higher payouts for bodily injury liability claims as well as other injury-related claims, such as those filed under MedPay or personal injury protection (PIP) policies. 

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Auto theft reaches near-record levels 

Almost 500,000 vehicles were reported as stolen in the U.S. in the first half of 2023, an increase of more than 2% year-over-year, according to the most recent data from the National Insurance Crime Bureau (NICB). 

Some states experienced significantly larger year-over-year increases: Illinois had an increase of 38%, followed by New York (20%) and Ohio (15%). 

“Overall, there were 1,001,967 vehicle thefts nationwide in 2022, which equals about two stolen vehicles every minute, up from 937,976 in 2021,” said Joseph Brenkle, NICB Director of Public Affairs. As the trend continues, more auto theft means more comprehensive claims, and these losses for insurance companies translate to higher premiums for customers. 

Auto accident rates decline as insurers adjust to past trends

The National Highway Traffic Safety Administration (NHTSA) has estimated that traffic fatalities declined by 3.3% during the first half of 2023, compared to the first half of 2022. That marked the fifth straight quarter of declines — a welcome decrease. 

However, a 19% increase between 2019 and 2020 left many insurers grappling with heightened claims costs.

“A key factor in determining underwriting profit is accident severity. Since the pandemic began in 2020, loss costs for accidents have been outpacing premiums charged, resulting in many insurers raising rates multiple times to offset losses. We are starting to see premiums catching up with loss costs,” Friedlander said. 

Cost of repairs driving up claims

New cars come with more technologically advanced features, driving up repair costs and subsequently, insurance premiums. According to AAA, many new cars have Advanced Driver Assistance Systems (ADAS), which include features such as:

• Adaptive cruise control.
• Adaptive headlights that steer with the vehicle.
• Automatic emergency braking.
• Automatic headlight high-beam activation and dimming.
• Blind-spot monitoring.
• Forward collision warning.
• Lane departure warning.
• Lane keeping assist.
• Parking assist/self-parking.
• Rear cross traffic alert.

While these features make driving safer, they also drive up repair costs, leading to more expensive claims and higher premiums to cover these claims.

Bodily injury claims are getting more expensive

A 2023 study released by the American Property Casualty Insurance Association (APCIA) indicated that the cost of bodily injury claim severity increased by 40% between 2018 and 2022. 

While the U.S. experienced a slight decreasing trend in medical costs in the early part of 2023, it’s unlikely this will have a positive impact on consumer car insurance rates. Medical costs began to trend back upward in August — we won’t be privy to the true annual increase until the first quarter of the new year.

However, according to an analysis of healthcare coverage under the Affordable Care Act (ACA) from the Peterson Center on Healthcare and KFF, the medical trend, which includes growth in the price that insurance companies pay for medications and medical services, will rise by about 8% in 2024. This increase will lead not only to higher healthcare costs but can potentially lead to higher car insurance costs as insurers pay out more for injury claims. 

Medical cost inflation only tells one part of the story, however. The same APCIA report suggests that deadly motor vehicle accidents and legal system abuse also increase the overall cost of bodily injury claims. 

As the cost of bodily injury claims increases, so do customer premiums, as insurers race to correct or prevent losses.

Climate change and natural disasters drive up costs

Climate change and the resulting natural disasters are wreaking havoc on the homeowners insurance industry, but the auto insurance industry hasn’t and won’t remain unscathed.

From 2020 to 2022, there were 20 billion-dollar weather events in the U.S., meaning that the events had overall damages/costs that were more than $1 billion, adjusted to the 2023 Consumer Price Index (CPI). 

In contrast, from 2010 to 2019, there were only 13 billion-dollar events: 6.7 from 2000 to 2009, 5.7 from 1990 to 1999 and 3.3 from 1980 to 1989. These events cost insurance companies billions of dollars, as they must pay home and auto insurance claims. From 2020 to 2022 alone, these events cost $456 billion. 

For auto insurance companies, climate change and natural disasters lead to comprehensive car insurance claims. This type of car insurance helps policyowners cover damages from non-collision events, such as hail, fire, flooding, falling trees, and other storm-related damage. 

Evidence of increasing weather-related claims can be seen in the latest data from the Insurance Information Institute (Triple-I), which shows a nearly 18% increase in hail claims from 2021 to 2022. A further analysis by State Farm indicated that the insurer faced a $1 billion increase for hail claims alone. 

Insurers increase rates to address previous losses

In the first quarter of 2023, U.S. private auto insurance companies had the worst direct incurred loss ratio in more than 20 years, dropping from 72.4% in the fourth quarter of 2022 to 76.2% by the end of March 2023. 

This means that although companies wrote $43.60 billion in private passenger auto liability direct premiums, there were $32.70 in physical damage premiums, so companies lost over three-quarters of customers’ premiums. 

“Unless replacement cost begins to decrease materially — which is not currently forecast — we project personal auto insurance to remain at an underwriting loss through 2025.”

Mark Friedlander, Triple-I

To make up for these losses, most companies raised their rates in the first quarter of 2023, so we can expect similar trends in 2024 as losses continue to increase.

^{Source: S&P Global Market Intelligence.}

Finding the best car insurance companies in 2024

Car insurance rates will continue to rise in 2024, making it even more important to that you find the best car insurance company to meet your coverage needs. Here are some things you can do to find the best match. 

• Shop around. Get car insurance quotes from at least three different insurance providers. Doing so can help you find the cheapest car insurance based on your needs and preferences. 
• Research each company. The cheapest rates don’t always equate to the best coverage. Before you make a switch, check out online car insurance reviews and speak with friends, family and coworkers about their experiences.
• Consider bundling. Bundling home and auto insurance, or other types of coverage, such as renters, can unlock savings. 
• Check for available discounts. Most insurers offer at least a few car insurance discounts. Whether you’re staying with your existing insurer or thinking about choosing a new provider, always ask about available discounts, which can lower your premiums. 
• Reevaluate your coverage needs. As time goes on, your car insurance needs can change. For instance, you may find that it may make sense to add or drop coverage, like gap insurance, based on your vehicle, risk factors and financial situation. The same can be true when it comes to increase or decreasing your deductibles or coverage limits. 

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