Due to an improving economy, job growth and record low gas prices, Americans are driving more. In fact, 2015 was the most heavily traveled year in history, with drivers logging more than three trillion miles, a 3.5% increase over 2014, according to the U.S. Department of Transportation.
The inevitable consequence of more miles being driven? More accidents, says Jeanne Salvatore, senior vice president and consumer spokesperson at the Insurance Information Institute Opens a New Window. .
When the number (and severity) of accidents rise, claims costs increase, says Salvatore. “Everything is costing more – from the size of claim settlements to litigation costs, medical costs to auto repair, which has gotten more expensive because people are buying more new, more expensive cars.”
Insurance companies are passing these costs onto you, the consumer, in the form of higher auto insurance premiums, says Joan Schmit, distinguished chair of risk management and insurance at the University of Wisconsin-Madison.
The federal government’s Consumer Price Index (CPI) for auto insurance – a proxy for policy rate activity – shows that prices have risen every single month this year.
Haven’t been hit with a rate hike yet? Buckle up, because it’s probably coming, says Schmit. “Insurers can only change rates every six months or so and they also must have rate increases approved by state regulators, so it can take a while.”