Why car insurance costs are rising at the fastest rate in 47 years

As car prices moderate from a pandemic-era surge, insurance has pushed the cost of car ownership to the brink for many Americans. 

New data out on Wednesday from the Bureau of Labor Statistics showed auto insurance costs last month were 22.2% higher than they were a year ago and increased from February's 20.6% year-over-year gain. This rise in prices is tied with January's increase as the largest gain since December 1976, when costs rose 22.4% over the prior year.

The sticker shock hitting many American drivers is being driven by a rise in accidents, the severity of accidents, and geographical factors combining to create a perfect storm and push costs higher. 

The most alarming factor driving insurance costs higher is more severe claims. 

«In general, the numbers of crashes, injuries, and fatalities are up, and inflation has made the cost of repairs more expensive,» AAA spokesperson Robert Sinclair told Yahoo Finance.

Sinclair said motorists developed «bad habits» on the road during pandemic lockdowns, contributing to current behavior. For example, as the New York Times reported earlier this year, researchers in Nevada discovered that during the pandemic, motorists were speeding more (and driving through intersections), seat belt use was down, and intoxicated driving arrests were up to near-historic highs.

Sinclair also pointed to NHTSA data, which found that in 2021, at the height of the pandemic, road fatalities increased by 10.5% to their highest level since 2005, even while most Americans stayed at home. The NHTSA said it was the highest percentage increase it had ever seen. The agency found that fatalities in 2022 only decreased by 0.3% as compared to 2021.

Insurance tech firm Insurify found that auto insurance premium hikes were «largely due to the skyrocketing price of auto parts and the increasing number and severity of claims.» And while increases may moderate, analysts still believe further premium hikes are on the horizon.

«While the magnitude of rate increases is likely to ease somewhat, after several years of double-digit increases, some lingering claim cost inflation and adverse claim severity and frequency will likely lead to a 'higher for longer' auto