If your car broke down two years ago, it probably became a bigger problem than you bargained for.
A confluence of forces were to blame: The Covid pandemic disrupted supply chains, pushing used car prices to record highs and making spare parts hard to get; out-of-practice drivers emerging from lockdowns caused more severe wrecks; and technological advancements like motion sensors made even the simplest parts, like a fender or a rim, expensive to replace.
Things have since improved for car owners — except when it comes to insurance bills. Car insurers are still raising prices steeply: The price of motor vehicle insurance rose more than 22 percent in the year through April, the fastest pace since the 1970s, according to a report the Bureau of Labor Statistics on Wednesday. According to calculations by the Insurance Information Institute, a trade group, the average 12-month premium for car insurance was $1,280 in 2023, the industry’s most recent figures.
That has made car insurance a prominent factor preventing overall inflation from cooling more quickly, which could force the Federal Reserve to keep interest rates higher for longer even as the prices for many other essential goods and services have slowed.
Geico recently reported a big jump in quarterly profit on higher premiums and lower customer claims. The share prices of other big auto insurers, like Allstate and Progressive, have beaten the rise in the overall market this year.
That has attracted scrutiny from economists. A key reason car insurance costs are rising so fast right now has to do with how the industry is regulated.