Auto Insurance Rates Jump for 48% of Drivers, Prompting Risky Cost-Cutting Measures

Though America’s inflation is mercifully cooling, that doesn’t mean prices are dropping – they are only rising more slowly. This easing also hasn’t impacted all industries equally. Rising costs remain rampant in certain sectors, including auto insurance.

We found that premiums had jumped for 48 percent of all motorists within the last six months and that another six percent received notification of impending increases. The average hike for policyholders with higher bills was a significant 23 percent. That increase averaged around $25-30 per driver per month among our respondents.

Average Monthly Auto Insurance Rate Increases

More frustrating still is that most increases arrived without explanation or through no fault of the motorists. While insurance rates can justifiably escalate due to numerous actuarial factors (i.e., collisions, excessive mileage, additional drivers/vehicles, changed locations), 85 percent of these premiums jumped without any change in driver profile or coverage. At a time when consumer confidence remains low and household budgets tight, these increasing insurance rates are also contributing to financial anxiety.

Another 85 percent of drivers are concerned about being able to afford escalating premiums. More than one-third of motorists are “extremely” or “moderately” concerned about the affordability of more expensive insurance, up from one in four just last year.

Price hikes are especially daunting to the sixty percent of working Americans who live paycheck to paycheck. Making ends meet under additional duress can drive many to reduce their coverage, alter their lifestyles, or resort to more dubious methods.

Unsurprisingly, many motorists are revisiting their coverage or adjusting budgets to handle increased auto premiums. It was more shocking to discover how many drivers would consider committing “soft fraud” if their insurance costs continued to rise.

The most common ways motorists might lie to insurers included underreporting the miles they drive, providing a fake address in a more affordable zip code, exaggerating the severity of claims, or neglecting to identify younger drivers behind the wheel. Twenty-two percent of Americans confessed that they had either already committed soft fraud related to their auto insurance policy or would do so to counter escalating premiums.

Among drivers under age 30, more than one-third admitted that they had committed or would contemplate fraud to help afford auto insurance. That number steadily declined as motorists aged, likely reflecting the lower premiums and greater wealth of older motorists.

While financial difficulties understandably spur desperate reactions, AutoInsurance.com cannot stress highly enough that fraud is never the right solution. Beyond being legally prohibited and morally dubious, lying on applications or claims will invalidate policy coverage. Even submitting “white lies” can leave one financially exposed, subject to criminal prosecution, and having wasted previous premium payments. It would also increase the cost of auto insurance coverage in the future.

Let’s examine more conventional approaches for managing higher auto insurance costs.

Auto insurance prices are individually calculated using a complex array of components. Chosen policy coverages and limits are the most determinative factors, but a motorist’s age, gender, driving history, vehicle type, residence, commute—even marital status and credit score—can all affect the premium. However, each insurance company weighs these factors differently to calculate drivers’ premiums.

For drivers hoping to keep costs down, some criteria are simpler and safer to alter than others. These are the insurance actions that motorists are most likely to take (or consider) in response to rising premiums.

Seventy-three percent of policyholders have already taken one or more of these actions. These savings approaches fall into several general categories, carrying varying degrees of risk and reward.

Reassessing insurance providers: Drivers were most open to shopping for a new provider or seeking a better deal from their current provider. Nine out of ten respondents were willing to switch companies, bundle multiple policies (home/auto/life), or ask their agent about discount opportunities. This straightforward approach is a sensible first step with minimal risk involved. Before changing carriers, however, be sure to investigate the reputation of all vendors, ensure that coverage levels are consistent across quotes you receive, and never let policies lapse as you switch providers. Enlisting the help of an independent insurance broker who doesn’t work for any one insurer can be an effective way to sift through the strengths of multiple companies.

Downgrading coverage: Three-quarters of drivers would consider saving money by lowering coverage limits or raising deductibles. Either approach reduces premiums but leaves motorists liable for more significant out-of-pocket expenses. An increased deductible means paying more out-of-pocket before coverage kicks in, while lowering coverage limits can leave drivers on the hook for damages after an accident. Before reducing your insurance coverage, consider your capacity to handle unexpected costs on your own. One in five drivers say they’d consider canceling their auto policy if it became less affordable. However, canceling your policy is illegal in nearly every state, exposes you to unlimited financial risk, and will make it significantly harder and more expensive to secure insurance in the future. It pays off to have auto insurance, even a minimum liability-only policy.

Altered driving habits: Driving less frequently and more safely are other ways to reduce premiums. Sixty percent of motorists would consider reducing their mileage to lower insurance costs. One-quarter say they might temporarily stop driving altogether. Reducing commutes, using public transportation, or taking advantage of remote work opportunities can decrease driving distance. Be sure to report mileage reductions to your insurance agent or consider policies that charge by the mile rather than by the month. Avoiding accidents and tickets can also qualify you for safe driver discounts. Finally, many insurers offer discounted rates based on your driving habits, tracked through an app or device (known as telematics discounts). While this approach raises privacy issues for some, it was considered amenable to 54 percent of respondents.

Changing cars: The type of car one drives can also significantly affect insurance costs. An auto’s value, age, safety features, susceptibility to damage, and statistical propensity for accidents, injuries, or theft all contribute to coverage calculations. Half of the motorists we surveyed would consider changing vehicles to keep their insurance more affordable. Check with your agent to find which models might save the most money, or conduct preliminary research independently.

Reducing premiums is one way to make auto insurance more affordable. Alternatively, one might increase income or trim household budgets. Over one-third of Americans told us they had already altered their habits, earning potential, or spending patterns to tackle rising insurance costs.

Those unable to sufficiently reduce insurance costs may need to alter their personal or professional lives to afford rising premiums.

Reducing household spending has been the primary method for accommodating higher insurance costs. One-third of drivers have already cut back their budgets, and another 55 percent would consider doing the same.

Overall, nearly half of policyholders (45 percent) have already made one of the following lifestyle changes in response to increasing insurance expenses:

Around three-quarters of Americans would consider seeking a higher income to pay for rising auto insurance costs. Some would change employment (64 percent), others might ask for a raise (61 percent), and many would contemplate taking on a second gig (60 percent). Ironically, nearly one-third might give up a side hustle – quitting rideshare driving because it increases their rates.

Approximately one-third of drivers would look into relocating to better afford insurance. Some would seek a zip code with cheaper premiums (29 percent), while others might move closer to work/school (28 percent).

With vehicle maintenance and fuel costs already inflated, increased insurance costs could motivate motorists to limit their driving or even quit altogether. Twenty-eight percent of auto owners would consider taking public transportation more often, and one in five motorists might ditch their vehicle entirely if faced with higher insurance payments.

One-quarter of drivers would ask their families for help with insurance payments if premiums continued to rise and stretch their budgets.

Elevated auto insurance rates remain a primary component of lingering inflation and a thorn in the side of American motorists. Premiums jumped 20 percent in 2023 and will rise 22 percent in 2024 with some states experiencing hikes as much as 50 percent this year. These high premiums also force more drivers to drop coverage, raising overall rates and fueling the inflationary spiral.

Our survey found that most drivers experienced or expected increased rates in 2024. Eighty-five percent also worry about affording future price hikes, with bigger insurance bills triggering financial domino effects that ripple through family budgets.

Some motorists shop for better bargains to handle higher costs. Others consider changing their cars, jobs, homes, budgets, or commuting practices to manage climbing insurance bills. One in five Americans admitted they might commit fraud to reign in their rising premiums. That number rose to one in three among drivers under age 30.

Auto insurance prices will likely continue to rise until consumers command greater leverage or the federal government implements industry-wide controls. In the meantime, count on AutoInsurance.com to monitor the situation and provide guidance for managing costs and finding the best deals.

In August 2024, we conducted an internet-based poll of 930 American drivers about their auto insurance costs. 96 percent of these respondents had active auto insurance policies and about 4 percent had their policies canceled within the six months prior to the study. 52 percent of respondents were female and 48 percent were male. 66 percent of respondents were white, 11 percent were Black, 10 percent were multiracial, 6 percent were Asian, and 7 percent were of another ethnicity. Participants ranged in age from 18 to 82 with a mean age of 46.