Car Insurance Rates Have Sharply Increased Over the Past Year. Here’s Why.

According to the Consumer Price Index, car insurance rates have experienced a striking increase of 19.1% in the past year, leaving many drivers puzzled. This trend, along with seasonal fuel price hikes have left many consumers financially strained. What is to blame for this concerning upward trend? Turns out there is no singular reason, but a range of factors impacting auto insurance companies and leading them to raise their rates. 

Car Thefts

One factor contributing to the national increase in car insurance rates is a high – and increasing – rate of theft. The FBI’s 2022 crime report noted a massive increase, 10.9%, in motor vehicle theft from 2021 to 2022, with nearly a million vehicles stolen in 2022. Some of the highest rates of car theft were reported in metropolitan areas such as Houston, Chicago, and Los Angeles, with thieves disproportionately targeting vehicles with keyless start systems, and other technologically advanced expensive luxury vehicles.

Due to this increase in incidents of theft, insurance claims related to stolen vehicles have also surged. This uptick in claims can have a cascading effect, compelling insurance companies to raise premiums in an effort to balance their books.

Deteriorating Driving Habits

Another factor contributing to high insurance costs is the growing trend of distracted driving among modern drivers. In particular, smartphone use has become a significant contributor to accidents. This even includes crashes caused by navigation apps, which many drivers mistakenly consider an exception to the ‘no phone use’ rule.

In 2020 alone, according to the NHTSA, 396 people were killed as a direct result of accidents caused by texting and driving, or over one death per day. Newer car models, with their intricate and occasionally overwhelming info-tainment systems, can also indirectly contribute to on-road distractions. The post pandemic environment contributes to driving trends, as well; with the easing of pandemic-related restrictions, highways in various states have observed an uptick in over-speeding incidents.

Whatever the reason, the increase in claims attributed to distracted driving has put additional stress on insurance companies, and higher claim frequencies invariably result in upward adjustments in premium rates. 

Repair Bills

What does an increase in car accidents lead to? More—expensive—auto repairs. A decade ago, a replacement for a car bumper could set a vehicle owner back by around $500. Today, however, due to integrated sensors and cameras in newer vehicle models, that same replacement could cost a car owner upwards of $1,500. Other features like adaptive cruise control and lane-keeping systems, although they enhance user comfort and safety, can also complicate and elevate repair costs. 

Repair costs have in turn been impacted by fluctuating costs of materials and manpower. Global supply chain disruptions have led to a rise in the cost of car parts, and skilled labor, including that of modern car repair, now commands higher wages, pushing up overall costs. As a result of this upward trend in costs, insurance companies have adjusted their premium structures accordingly. 

Empowering Your Mobile Employees

Insurers walk a fine line, balancing customer affordability with their own profitability, leading to skyrocketing costs when impacted by other variables. If you employ mobile workers who use their own vehicles for work on a daily basis, this is a reality you should be aware of so you can reimburse employees fairly for their vehicle use. In addition to a fair reimbursement, how can you help your employees manage their costs?

Encourage Smart Shopping

Just as you’d compare vehicle costs around for a new car, it’s prudent to do the same with insurance. Periodic rate comparisons can help save drivers hundreds of dollars annually. To help your employees make the best choice, you may consider implementing a program to assist them in comparing rates for your area (because after all, auto insurance premiums vary widely depending on your location). 

Promote Safe Driving

Insurance companies often reward good driving, and you should, too. Make safe driving behaviors part of your mobile employee training, and reward employees with safe driving records. 

Don’t Let Car Thieves Win

Car theft can become a big issue for your employees and your business, especially if company-owned equipment or sensitive client information is compromised or stolen. Educate your employees on theft-prevention measures, and if it’s of particular concern for your company, you may consider reimbursing employees for the purchase of anti-theft systems they can install in their vehicles. 

CompanyMileage Keeps it Customizable 

Rising insurance costs can be tough for everyone, especially vehicle owners who use their cars for work. For employers with a high number of mobile employees, paying attention to these trends can help keep mileage reimbursement rates for those employees fair. At CompanyMileage, our suite of software solutions for reimbursement is customizable at almost every level to help employers keep reimbursement fair, fast, and accurate. We even offer a free rate calculator to help organizations figure out fair mileage rates. 

For more information on how CompanyMileage can empower your mobile employees and bolster your business, contact us for a demo today!