The cost of the average auto insurance policy last month was 20.3% higher than a year earlier, according to the Bureau of Labor Statistics. It's the highest one-year increase in insurance costs since 1976, according to Bloomberg.
The average six-month policy starting in December cost Americans $780.28.
Auto insurance showed a higher increase than any other component of the Consumer Price Index – the government's primary measure of inflation. The index showed that the overall inflation rate reached 3.4% during the same period.
Car insurance rates vary widely from state to state, as state laws control liability in accidents.
is reading: These are the most expensive and least expensive cars to insure
High repair costs
High repair costs are the biggest factor driving insurance inflation. A New York Times analysis in July found that the average cost of repairing a car after an accident rose 36% in just five years.
Today's high-tech cars often have expensive sensors in vulnerable places. For example, the radar and lidar sensors that govern the intelligent cruise control system need to be located on the outside of the vehicle in order to work properly. This makes it vulnerable to damage even in low-speed accidents.
Even a simple windshield replacement can now cost more than $1,000 thanks to the built-in sensors and lenses of traffic scanning cameras.
See also: The nine things that will most likely affect your auto insurance rates
Climate-induced disasters are also a factor
A September analysis by The Washington Post found that climate-related weather events also play a role.
Hurricane-prone Florida is the ultimate example. At least one prominent insurance company — Farmers Insurance Company — recently elected to divest from the state entirely.
See also: Lawmakers investigate insurance crisis as premiums rise
The cost of repairing electric vehicles is greater
Electric vehicles represent a small but growing percentage of vehicles on American roads. Cox Automotive, parent company of Kelley Blue Book, reported that 7.6% of new cars bought by Americans last year were electric — up from 5.8% in 2022 and 3.2% in 2021.
Electric vehicles can be more expensive to repair than gas-powered cars. The problem is particularly acute with TSLA,
products. Some studies have shown that electric cars from other brands are only marginally more expensive to repair than gas-powered cars, but Teslas are so expensive to repair that insurance companies often write off even models with minor damage.
High repair costs are said to have contributed to Hertz's HTZ,
The recent decision to liquidate a large portion of the Tesla fleet.
Read more: Is buying a used Tesla from Hertz a good deal? Here's what you should know.
The company responded by launching its own insurance. But an insurance pool consisting entirely of cars that are expensive to repair has its own problems.
This story was continued in the original KBB.com.
