Car insurance rate hikes causing sticker shock
Dec. 11—Jackie Hunt was stunned to open her six-month auto insurance renewal notice and discover her premium increased $150.
The 60-year-old Blakely woman anticipated a hike given inflation, but the rate seemed exceptionally high as she and her husband, Richard, 62, had no accidents, tickets or change in coverage.
"I was beyond flabbergasted," she said. "Nothing had changed. We did not go up with anything as far as comp and collision and we did not lower anything. It was a complete shock."
Nationwide, car insurance rates increased 11.6% from January to October, and 12.9% compared to October 2021, according to Consumer Price Index data published by the U.S. Bureau of Labor Statistics.
In Pennsylvania, auto insurance premiums for the 40 largest insurers rose an average of 12.7% as of November, according to rate hike filings analyzed by New York-based S&P Global Market Intelligence, a provider of information services and solutions to global markets.
GEICO Corp. had the largest average hike, 23.4%, affecting about 408,000
Farm, with an average 16% increase on about 2 million policies, and Liberty Mutual, with an average 17.9% hike on about 222,000 policies.
Industry analysts say the increases are largely tied to inflation and supply chain issues that caused soaring cost for parts, repairs and crash-related medical treatment.
The number and severity of car accidents also increased, reaching a 16-year high in 2021, according to the National Highway Traffic Safety Administration.
That combination led to significant underwriting losses for insurers, said Mark Friedlander, spokesman for the New York City-based nonprofit Insurance Information Institute.
"Some industry leaders have indicated 2022 will be their company's worst auto underwriting year on record," Friedlander said.
That resulted in many insurers seeking multiple rate hikes this year, said Cate Deventer, an insurance analyst with Bankrate, a personal finance website that provides information to assist consumers.
The average annual cost of car insurance in Pennsylvania this year was $2,002 for full coverage — 13% higher than the U.S. average of $1,771, according Bankrate's analysis of average quoted premiums from Quadrant Information Services.
What drivers pay varies based on individual factors, including driving record, age, type of vehicle, city of residence, miles driven and coverage limits.
Bundling auto and homeowners insurance, paying the premium in full and maintaining a good driving record can reduce rates. Industry analysts point to other ways to reduce rates:
—Get quotes from several carriers. Insurance companies have proprietary rating models that can vary significantly, including based on a geographic area, Deventer said.
"The exact same coverage can cost wildly different amounts with different insurers," she said. "Quotes can vary by hundreds of dollars."
The Hunts found a new auto and renter's insurance policy with the help of Brianna Keeler, a licensed insurance agent with Comparion Insurance in Moosic. They will save about $350 annually between the two policies.
—Select limited tort and/or alter coverage levels. Pennsylvania allows drivers to choose between full tort and limited tort policies, which dictates rights to recover damages if hurt in a crash caused by someone else.
Limited tort policies save about 10% to 15%, but policy holders lose their right to sue for pain and suffering except in the case of serious injury and certain other exceptions. Statewide about 65% of passenger vehicles were insured with limited tort in 2020, the latest data available from the Pennsylvania Insurance Department.
Dropping or increasing deductibles for collision and comprehensive insurance, reducing liability coverage and/or dropping underinsured/uninsured motorist coverage also saves money. Consumers should take great care when considering those options as they can significantly increase out-of pocket costs and/or expose assets.
Pennsylvania requires motorists to carry minimum liability coverage of $15,000 a person, $30,000 per accident and $5,000 in property damage.
Noreen Thomas, owner of a State Farm agency in Clarks Summit, said lowering liability one level in most cases will only save a few dollars. She strongly advises clients against carrying only the minimum because it exposes them to significant risk, especially with increased repair and medical costs.
"If you hit another vehicle and there is more than $5,000 in damage, they can come after you to repair the vehicle," she said. "Today, $5,000 in damage can be repairing a dent in a door and repainting."
On the flip side, dropping uninsured/underinsured motorist coverage puts your well-being in jeopardy, said attorney Dan Munley. That insurance allows policy holders to collect on their own policy if they're injured by another driver who had too little or no insurance to cover damages.
"You're protecting yourself from catastrophe," Munley said.
—Consider installing devices that monitor driving habits. Several insurers offer discounts for using a phone application or vehicle-installed device that monitors driving habits, including how hard and often you brake, how quickly you accelerate, mileage and the time of day you drive. Discounts typically amount to about 4%, according to a 2022 analysis of rates by the Zebra, an auto and home insurance comparison website.
Most insurers only use the data for the discount and not to penalize bad driving habits, but consumers should check with the insurer, Deventer said.
Pennsylvania does not bar insurers from using the data to raise rates, but requires identification of the tracked driving habits and how it might affect rates, according to the Pennsylvania Insurance Department.
State Farm only uses its data from tracking devices for discounts, which start at 5% of the premium and can increase over time, up to about 20%.
"We have some people who are very hesitant about it, but then someone in the family tries it and they see the discount," Thomas said.
Contact the writer: tbesecker@timesshamrock.com; 570-348-9137; @tmbeseckerTT on Twitter.
