The cost of car insurance has Macro impact because almost every American household has at least one vehicle and the cost of insurance cuts into discretionary spending on goods and services.
An increase in the cost of car insurance will slow the real economy and also raise inflation (which could prompt the Federal Reserve to keep raising the fed funds rate).
Car Insurance Rates Are Soaring With Little Relief in Sight
Regulators are starting to push back against premium increases of as much as 40%
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Even states with consumer-friendly laws, and the power to veto increases, are allowing rates to rise. California this year agreed to more than a billion dollars of car-insurance premium increases, according to consumer advocates.
Insurers are getting big bumps because they have suffered big losses. Car insurance premiums could keep increasing through the end of 2024…
Premiums are increasing faster than other inflation-hit items, such as rent and food. Car-insurance rates increased 17% in the 12 months to May, more than four times the 4% rise in overall inflation, Labor Department data show…
Auto insurers say their rate requests are driven by necessity, not greed. The cost of claims has soared since the pandemic, due to more accidents, higher repair costs, bigger medical bills and increased litigation. Car insurers last year lost on average 12 cents for every dollar of premium written, according to S&P Global. State Farm, the country’s biggest car insurer by premium volume, lost 28 cents for every dollar written last year, posting a $13 billion underwriting loss for its auto arm…Insurers say states that push back too hard can end up hurting consumers, by causing companies to either pull back or impose much bigger increases than those initially requested… [end quote]
Every state is different because they all have different ways of regulating insurance prices. But no company can afford to do business if they are losing money and prohibited from raising prices to cover costs.
IIRC, car insurance is also included in the CPI. Since policies are renewed on an annual basis insurance would be included in the sticky-inflation category.
The regulators can push back as much as they want, but as soon as the insurance company determines it isn’t profitable anymore, they simply stop writing policies in those areas. Either the state will have to provide a “public”, government-funded, insurance policy or allow rate increases or people will simply drive without insurance. Here in Florida, “without insurance” means paying 1/12 (one month) of insurance at an agency next door to the DMV so you can get the insurance card required to re-register the vehicle. But then not paying the remaining 11 months. It’s probably similar in most other states.
I’ve read that as much as 45% of drivers here in South Florida are “without insurance”. Crazy high. The only real solution is to confiscate cars caught without insurance, lock stock and barrel. That will reduce uninsured vehicles on the road by A LOT. And it will likely lower insurance rates overall.
Yup. Same in Michigan. Thanks to the (L&Ses) in Lansing, Michigan has some of the highest insurance rates in the country, even after the reform a few years ago that lets we old phartz on Medicare opt out of the infinite medical coverage that used to push everyone’s insurance bill into the stratosphere.
As you said, there is always an insurance agency next door to the Secretary of State office. People get the certificate of insurance, go next door, get their registration, then go back to the insurance agent and cancel the insurance.
Michigan used to issue a different license plate, in a different color, every year. Since the late 70s, the state has issued a plate, then sends out small stickers to be applied to the plate. The stickers change color from year to year, but they can’t be seen at a distance. A lot of people, besides not paying for insurance, don’t renew the registration every year, taking a chance an officer will not look closely enough at their car to see the wrong color, or no, annual sticker, on the plate.
This is the Secretary Of State office near my home, with the nearby insurance agency.
