Why Are Car Insurance Premiums So High in the U.S

As the cost of living in the U.S. rises more generally, car owners in particular are feeling the pinch. Ever since 2020, insurance rates have steadily increased, with the jump between 2023 and 2024 being a whopping 22%, the largest hike since 1976. This is an understandably major concern for vehicle owners, many of whom are asking why this is occurring and how it can be reversed.

“The rise in insurance premiums is a complex, multifaceted problem that has only worsened since the onset of the pandemic,” says Nigel Tunnacliffe, Co-Founder and CEO of Coastline Academy, the largest driving school in the country and the 6th fastest-growing education company in America according to Inc.com. “The causes are often global in scale, but the effects are localized to each consumer’s wallet, making it an understandable cause of concern for millions. For those looking to mitigate the effects of these rising prices, it’s important to start by understanding why they are growing in the first place.”

Following are some of the most significant factors that are driving up auto insurance premiums:

1. More distracted driving.

Research has shown that, in the years since the pandemic, rates of dangerous driving behavior have grown consistently each year. This encompasses everything from speeding to distracted driving, behaviors which have grown significantly among drivers of all age groups. Despite concerted efforts to raise awareness about the extreme dangers of texting and driving, it is becoming increasingly common for drivers to check texts or emails while on the road. These lapses in concentration do not only lead to more accidents overall, but more fatal accidents as well. This results in higher premiums for all drivers–even those with good driving records–and especially impacts both new drivers and seniors, who tend to pay more in general.

“In the U.S., we lack a consistent driver’s education framework across the various states, and many students are underserved by the current system”, says Tunnacliffe. “While informational campaigns are important, there is no substitute for experience, and expanding both the reach and quality of driver’s education needs to be a priority. Bringing the system up to date through expanded curricula and the integration of technology that meets the needs of the modern student is essential to promoting positive driving behaviors on a mass scale.”

2. Increased automotive thefts.

Another reason behind the general rise in insurance prices is a growth in car-related thefts. This refers both to vehicles themselves and to specific parts, such as catalytic converters, which are commonly sold for scrap. While there is no singular cause for this phenomenon, the fact that a large number of Kia and Hyundai vehicles built between 2011 and 2022 were built without engine immobilizers–an essential safety feature that prevents cars from starting without the correct key or fob–has added to the spike in numbers.

When it comes to protecting yourself against car theft, make sure to always keep your keys or fob on your person, park in well-lit, high-density areas, and install an anti-theft device in your vehicle. Many major insurers, such as GEICO and State Farm, offer discounts to drivers who install such devices. For owners of affected Kia or Hyundai models, both companies are offering free car locks and software upgrades to compensate for the increased risk.

3. Cars are getting more expensive.

The rise in insurance premiums can also be partly explained by the fact that cars themselves are becoming more expensive. As cars integrate increasingly sophisticated tech features, they become more expensive to repair, making them correspondingly more expensive to insure. This fact is especially pronounced with electric vehicles, as their batteries require materials that are more difficult and expensive to replace than standard engine parts.

At present, electric cars are more expensive to insure than gas-powered vehicles, a fact which is partly due to the materials needed to build one and partly due to their being a relatively new class of vehicle. Insurers often look at the history of claims and repair costs for a particular vehicle model when determining insurance prices–at present, these numbers are both higher for EVs, simply because there are fewer of them on the road. As production of EVs increases and their use becomes more common, however, these costs may level out.

Ensuring Lower Costs

While individual consumers have little control over the macroeconomic shifts that are influencing insurance rates, there are steps that each driver can take to reduce their own personal costs.

“When it comes down to it, the best and most consistent way to keep premiums low is to always approach the road with a conscientious, safety-first mindset,” says Tunnacliffe. “Regardless of what is going on with global supply chains or major automobile manufacturers, if you get into multiple accidents or are ticketed multiple times, your premiums will skyrocket. Knowing the rules and laws of the road and abiding by them at all times, as well as prioritizing safety above all else, will always help keep your personal costs down.”

In addition to driving safely, consumers should also do their due diligence on both the car they choose to buy and the insurer they choose to partner with, as these choices can profoundly affect their premiums. With the right knowledge and tools, it is entirely possible for drivers to ride out these tough economic times and keep their wallets safe.