Eggs and housing prices are hot-button inflation issues in metro Phoenix, and now car insurance is joining the list.
Drivers around the Phoenix area are facing the second-largest price hikes of any large city, with premiums up 17.3% on average compared to last year, according to a new study. Only Orlando saw a bigger jump, with premiums rising by 22.6%.
And just like you might shop around more for food or an apartment, this is a good time to receive a few more auto-insurance quotes if you haven't done so lately, especially if your driving patterns, credit score or other factors have changed.
"There's no downside to shopping around," said Cate Deventer, a Bankrate auto-insurance analyst.
Phoenix drivers pay an average of $2,164 for auto insurance annually, equal to 3% of their household income, according to the study by Bankrate.com, which tracked comprehensive policies (which cover basic collision risks along with other dangers such as theft, vandalism and windshield damage). Inflation is a primary culprit, with prices rising for mechanics, other types of labor, repair parts and more.
"Really, the numbers come down to inflation," Deventer said.
Nationally, the same coverage averages $2,014 a year, according to Bankrate.com, taking a slightly smaller bite of 2.9% out of average U.S. household income. Insurance premiums rose 13.7% nationally over the past year, according to the study.
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Several dozen companies compete to provide car and truck insurance in Arizona, and the Arizona Department of Insurance and Financial Institutions compiles periodic price-comparison reports. The reports show premiums for different types of hypothetical drivers and conditions. The variables include driver age and gender, types of cars or trucks driven, mileage differences, various types of coverages, driving records, different cities of residence and different credit profiles. While insightful, these price comparisons are so specific that they might not fit your situation all that closely.
At any rate, Deventer thinks more premium hikes could come, as insurers are requesting higher rates from state insurance departments that reflect price levels in 2022, when inflation was a bit higher than it is currently.
Inflation in general has stayed lofty in the Phoenix area, which had the nation's second-highest overall inflation rate of larger cities tracked by the Bureau of Labor Statistics, with prices up 9.5% on average in 2022.
Mechanics, warehouse workers, drivers who deliver parts to repair shops and people in many other roles are receiving higher wages. Rising labor costs are spread over "everything from the creation and installation of that bumper to the paint that is being applied to it," said Jeff LaScala, an independent insurance agent and president of the Coverage Pro in Sun City West.
Collisions matter, too
Auto insurance premiums are, of course, also affected by the frequency and severity of claims. While the long-term trend is favorable in many respects, collisions are on an upswing again after a pandemic slowdown when many workers didn't need to commute to their jobs.
"After decades of decline, traffic deaths have increased in the past several years due to riskier driving behaviors —more speeding, driving under the influence, not wearing seat belts, distracted driving," read a commentary by the Insurance Information Institute. In 2021, U.S. traffic deaths reached a 16-year high, with nearly 43,000 deaths, the group said, citing statistics from the National Highway Traffic Safety Administration.
With collisions rising, supplies still trying to catch up and more sophisticated and expensive parts going into each vehicle, repair costs also are on the upswing, LaScala said. Even the sensors in the windshield system might require microchips and calibration, he added.
And there are emerging repair issues, such as the trend of more thefts of catalytic converters, based on their precious-metals content. With the right tools, two experienced thieves can steal a converter in less than two minutes, LaScala said. The thieves might receive only $25 to $100 sell a converter to a scrap yard, while motorists might need to spend $1,100 or more to replace one, he added.
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Against that backdrop, auto insurers apparently misjudged the effects of the pandemic and aftermath. When accidents initially ebbed early in the pandemic, they returned $14 billion in refunds and account credits to customers. But losses now exceed pre-pandemic levels and premiums likely will need to keep climbing "significantly" in years to come, the institute predicts.
Factors affecting insurance pricing
Causing an accident could boost your insurance premium. So would adding a teen driver to your policy. Even a notable decline in your credit score could be harmful. Most states including Arizona allow insurers to use credit scores in setting premiums, as drivers with lower scores are more statistically likely to submit claims, according to the Bankrate study. In general, premiums nationally for people with poor credit scores were nearly double those of drivers with excellent credit, the report said.
But several factors also can lead to lower premiums, which can make comparison shopping worthwhile. The Insurance Information Institute suggests getting quotes from at least three insurers.
Also, you might cut your premium by reducing coverage on older vehicles that might not be worth as much as you think. Among other cost-saving suggestions, you might want to seek a low-mileage discount if you don't drive much, install an anti-theft device, check premium costs before purchasing a certain vehicle and bundle your homeowners and auto insurance policies with the same company.
And if you can afford to pay a bit more for repairs directly, consider raising your deductible from, say, $200 to $500 or even $1,000. Those increases could result in reduced premiums of at least 15% and as much as 40% or so for collision and comprehensive policies, the institute said.
Stand by your driving record
Insurers reward good drivers with lower premiums. If you're willing to demonstrate your driving patterns, consider looking for discounts tied to various telematic devices, Deventer suggested.
Here, drivers agree to install a device or download a cell phone app that monitors driving behavior. That includes speed, acceleration and braking, common times of the day for driving and whether motorists use their cell phones while in the car.
But this is a potential double-edged sword that can flag bad driving behaviors, too. Along with the potential for premium decreases, "Insurance companies can increase your rate, too," Deventer warned.
A Consumer Reports study found that the savings can be significant but that motorists also face various drawbacks ranging from less privacy to possible premium increases for night-shift workers.
Reach the reporter at russ.wiles@arizonarepublic.com.
