The automotive sector is one of the biggest segments in the US
But what about insurance?
Here are some trends in car insurance and some plain facts to understand the segment better.
Rise in premiums
Car insurance premiums are rising. In 2024, the average car premium that a user pays will be around $1547/ year for full coverage. The premium was around $171.87 in 1990. The main reason for this jump is, obviously, inflation and other macroeconomic factors.
The growth of the industry
In 1990, there were just 191 million cars registered in the US all put together. Cut to 2024, and there were around 75.4 million cars sold in just one year. The numbers are huge and given the mandated requirement of basic car insurance in every US state, the car insurance industry has seen growth too. According to reports, the US car insurance industry is valued at $360.72 billion in 2024 and is expected to go up to around $453.83 billion by 2029 with a CAGR of around 4.7%.
A battle between ICE and EV
The automotive market is seeing new innovations and options, be it micro-mobility or self-driving cars. As per a report by the IEA, around 10 million EVs were sold in 2022. By the end of this year, the number of EVs on the road is likely to increase by around 21% in the US. And this has an impact on insurance. As per reports, it costs around $44 more to insure an EV than a standard car. Nevertheless, the growth of electric vehicles will only see an upward trajectory moving forward.
Two states, two laws
Auto insurance is required in every US state for all kinds of vehicles, including personal and commercial. Nonetheless, there are differences between the laws in each state regarding auto insurance, which makes it challenging to standardize the market or rates. While purchasing a standard auto insurance policy required by state law, one might fall victim to changes in coverage with respect to other state laws. All auto owners must register and ensure their vehicles are within the boundaries of their home state. If they travel frequently, they must modify their policies to meet the requirements set forth by the government in other areas to avoid legal trouble.
Insurance can be transferred
Most households have multiple drivers operating the same vehicle. However, usually, only one person is covered by the insurance policy. This implies that it becomes more challenging to submit a claim if the policyholder was not operating a vehicle at the time of the collision or mishap. However, policyholders have easy access to transferring their insurance to a new owner or driver if they do not drive too much. Numerous insurance plans, such as umbrella insurance, can also assist in paying for problems that occur when the policyholder’s vehicle is being driven by another person in the family.
No-claim bonus is real
Has anyone ever wondered whether no-claim bonuses (NCBs) even work? Well, they do. NCB can lower the premiums that each policyholder must pay at the time of renewal by up to 20–50%. This occurs if the policyholder did not file any claims—accidental or legal—during the entire year when the policy was in effect. NCB provides a reasonable opportunity to lower the premiums with minimal additional work, other than being a safe and careful driver.
Shocking factors that determine premiums
A lot of regional variations exist in auto insurance rates in the United States. States that offer full coverage at relatively high average premiums—roughly $3900—include Florida, New York, Louisiana, Nevada, and others. First and foremost, location is the biggest parameter in determining the premium and coverage. After that, factors like driving record, credit history, gender, age, etc., drive the premium to be paid for car insurance.
Car security matters
In the US, automobile theft and vandalism have caused havoc in recent news headlines. For instance, after a TikTok trick was shared, a few Kia and Hyundai vehicle models were stolen, some even thrice. A lot of insurance companies expressed great skepticism about providing insurance coverage for these types of vehicles. The premiums for any insurance policies that companies did offer for these vehicles were typically extremely high. Therefore, to keep the insurance away from an excessively high premium, it is now crucial to consider security features in the vehicle.
Theft is not covered
Car theft remains a big issue in the US. From 2019 to 2022, the country saw an increase of 25% in car theft. Believe it or not, basic car insurance does not provide coverage if the car is stolen. To receive any kind of compensation, one needs to buy comprehensive car insurance, which can also be seen as buying full-coverage car insurance. So, for an individual living in a risky neighborhood or who parks in the open, buying full coverage is of utmost importance.
Look for discounts but not cheap policies
When looking for the right policies, people frequently purchase inexpensive policies. However, things could turn out very badly while following this course. When distinguishing between discounts and inexpensive policies, extreme caution needs to be exercised. Knowing one’s needs and communicating them honestly to the insurance providers can therefore be very important.
Gonzalez Insurance assists people in creating a policy that best fits their needs, including individuals and small business owners. With this, the policies become more robust and effective as a result of being able to pay for what they need. Contact us for a thorough portfolio assessment.