Why 15 Percent of Drivers Let Their Car Insurance Lapse

Transunion reports that 15 percent of drivers let their insurance lapse in the first quarter of 2023.¹ There are many reasons for this. One reason is that they forget to pay the premium when it is due. Additionally, some people may have trouble getting insurance after a policy is deemed nonrenewable due to too many accidents or tickets.

But the Transunion report found that of those people allowing policies to lapse, 30 percent of them said it was due to their inability to pay. Essentially, rates have gone up too high, and policyholders are unable to afford the payments.

To better understand why consumers are letting policies lapse, we should look at why rates are skyrocketing.

One of the reasons is that auto parts prices are increasing. In fact, in 2023, prices of parts have jumped 20 percent, according to the Bureau of Labor Statistics.¹ This spike is in part due to supply chain issues and inflation. Body shops and mechanics have to pay more for the parts, which they pass down to the insurance companies paying the claims.

Additionally, repair times are taking longer. The labor force is small, and auto body shops and mechanics are struggling to get the right staff to fill the roles. This lack of staff leads to an extended time for auto insurance companies to pay for rental cars while insured cars are in the shops.

Insurance rates have increased annually for the past nine years, dating back to 2014. From 2022 to 2023 alone, annual rates increased from $1,650 to $1,886.

The same Transunion report notes that consumers are shopping for better insurance rates more often. In March of 2023, the number of high credit shoppers (those with credit scores of 701 or higher) increased 13 percent year over year. This statistic means that one of the most sought-after groups of drivers, those with high credit, are on the move, unhappy with renewal rates.

Those with good credit scores of between 501 and 700 saw a decrease in shopping by 13 percent, while those with poor credit saw a drop of 4 percent. People in these categories are staying where they are or letting policies lapse.

Additionally, consumers are getting more car insurance quotes from multiple sources, looking for the best deals. The number of inquiries has increased from 1.43 to 1.55 per consumer. Consumers are going to agents to find better deals, with a 25 percent increase in insurance agent shopping in Q1 of 2023 compared to 2022.

A lapse in car insurance coverage is when your coverage stops after a specific date, and you no longer have insurance for an automobile. If you choose to cancel your insurance policy without having another policy in effect, this is a voluntary lapse in coverage.³ It’s important to remember that some insurers will charge you more when you purchase a policy if there has been a previous gap in insurance coverage.

There are many reasons that an insurance carrier may choose to cancel or not renew a policy. One of the most common reasons is that the policyholder did not pay for car insurance past the grace period, often because they could not afford an increased rate.

Another reason is that policyholders may have too many accidents, claims, or tickets, making them high-risk drivers. At some point, many large carriers will drop them, forcing them to go to more expensive, specialized carriers. Insurance fraud is another reason carriers will drop policyholders.

Sometimes, there’s nothing that the driver did to have the car insurance company not renew the policy. The carrier may simply choose to no longer service the area due to higher risk overall.

Since many policyholders are allowing policies to lapse due to prices, it’s important for all policyholders to shop around for better rates and get the best prices possible. Find the best cheap car insurance for you.