Drivers now face rising car insurance rates after pandemic discounts

Two years after issuing billions of dollars in rebates and discounts during the pandemic, car insurers are now raising premiums for their customers.

The Progressive Corp.’s subsidiaries received approval for 38 rate increases across 10 states in November, while regulators in 13 states okayed 20 rate increases by Allstate, according to S&P Global Market Intelligence. GEICO subsidiaries got 12 rate hikes across six states approved that same month.

The most notable 10 increases that S&P Global Market Intelligence recorded clocked in between 3% and 12%. Additionally, insurance comparison site The Zebra said car insurance rates nationwide rose 3% from last year, with 38 states seeing increases.

The reasons for the increases are manyfold.


“The intersection of an improving economy, increased dangerous driving behavior, rising injury and vehicle costs, increasing litigation, severe supply and demand imbalances, as well as COVID-19 related global shipping challenges are combining to create significant upward pressure on auto insurance pricing,” said David Snyder, vice president of the policy research and international division for the American Property Casualty Insurance Association, in a statement at the end of December.

Wyomissing, PA - January 24: At the intersection of State Hill Road and Woodland Road in Wyomissing, PA January 24, 2022. (Photo by Ben Hasty/MediaNews Group/Reading Eagle via Getty Images)
At the intersection of State Hill Road and Woodland Road in Wyomissing, PA January 24, 2022. (Photo by Ben Hasty/MediaNews Group/Reading Eagle via Getty Images) (MediaNews Group/Reading Eagle via Getty Images via Getty Images)

Increased road fatalities

Around 20,160 people died in car accidents during the first half of 2021, up 18.4% from 2020, according to a report by the National Highway Traffic Safety Administration. The report showed road traffic in the first half of 2021 increased by about 13% and so did the fatality rate — up 1.34 fatalities per 100 million vehicle miles traveled (VMT) compared with 1.28 fatalities per 100 million VMT in 2020.

“We saw faster driving on less crowded roads in the midst of COVID,” Marty Ellingsworth, executive managing director at J.D. Power, said. “That is still here and present.”

Bad weather

Changing weather patterns are causing more storms and sometimes in areas that previously didn’t have extreme weather. The Zebra said that although there were fewer hurricanes in 2021, severe winter storms in 2021 “caused a record $15 billion in insured losses, up from $1 billion in 2020, almost entirely due to two storms that occurred in February.”

Where you live will factor heavily in the percentage of increase you can expect from your car insurance provider. For those who live in areas prone to natural disasters or high traffic urban areas, the increase will likely be higher.

Car insurance rates are increasing after pandemic rebates
Credit: The Zebra's "2022 State of Auto Insurance" (The Zebra’s “2022 State of Auto Insurance”)

Supply issues

The demand for new cars increased dramatically during the pandemic. Unfortunately, supply chain issues caused huge delays for purchasing a new car. This delay caused used car prices to increase and the cost to insure them. According to the U.S. Bureau of Labor Statistics, in 2021 new car prices rose 11.8% and used car prices rose 37.3%.

“The prices of used cars skyrocketed in the last twelve months creating headlines around used cars being worth more than a similar model new car,” Ellington said. “This inversion of depreciation — normally cars get cheaper as they age — will hit insurance claims and claimants directly first, then as likely price increases indirectly second.”

Auto theft

An increase in auto thefts and auto parts also contributed to the rise in insurance rates, according to the (APCIA). Stealing cars for parts is on the rise with converter theft claims rising nearly 293% nationwide from mid-2020 to mid-2021, the APCIA said.

Despite an increase in rates, drivers still may be able to find deals on car insurance by shopping around and seeking discounts.

“Be on the lookout for better deals,” Ellingsworth said. “2022 may shape up to be the year of value seeking in insurance.”

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Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda

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