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What’s Driving Up the Cost of Car Insurance?

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What’s Driving Up the Cost of Car Insurance?

If the price jump on your last auto insurance policy made your jaw drop, you’re not alone. Insurance rates have been on the increase, rising more than 19%1 in the past year — the biggest annual increase since 1976.

person holding toy car sitting on top of stacked pennies trending upward

Yet whether you or a family member are behind the wheel, auto insurance provides valuable financial protection against damages caused by an accident or if your vehicle is targeted by thieves. It’s also required by law in Texas, so you definitely want to ensure you’re adequately covered.

Let’s look at factors driving car insurance premium increases — and what you might be able to do to manage those costs.

3 reasons why car insurance premiums are rising

The price of auto insurance depends on the type of car you drive, how much you drive, where you live — even where you park your car. Insurers look at those factors to determine the cost of car insurance2 — and three factors in particular are putting pressure on premiums.

1. Repair and replacement costs

Insurance is designed to pay for replacing or repairing something that is damaged or lost. Car prices and repair costs have risen sharply due to inflation. Today’s cars and trucks are made differently — and include more technological components. Parts are more specialized than they used to be and thus cost more when replacements are required.

Furthermore, supply chain disruptions that began during the COVID-19 pandemic have caused both vehicle and parts shortages, also pushing costs higher. Meanwhile, car and truck prices have risen dramatically — even for used vehicles — and a shortage of mechanics and laborers has increased the time it takes to repair vehicles. How does that impact costs? Some policies include rental reimbursement while the owner’s vehicle is being repaired or replaced — and the continued shortage of rental cars has caused rental costs to skyrocket.

Auto insurance isn’t just based on the cost of repairing or replacing your vehicle. It factors in other vehicles or property involved in the accident, as well as the other driver and any passengers. Depending on the accident and who was involved, the cost to manage everyone’s needs can quickly grow. And auto insurance also pays for medical bills and expenses related to an accident. Alas, those costs are on the rise as well.

2. Driver behavior

During the pandemic, many insurance companies issued refunds because people were not driving their cars as they stayed at home. But thanks to fewer cars on the roads — and less law enforcement presence — some drivers picked up bad habits, including speeding and reckless driving. As people slowly returned to their regular commutes and routines, those bad habits have increased the number of accidents — and traffic fatalities. The good news? That negative trend3 may be on the decline.

But there’s still some bad news: Texas claims the nation’s top spot4 when it comes to bad driving. From ignoring traffic signs and signals and wrong-way driving to looking at their phones, Texas drivers don’t exhibit the best behavior behind the wheel. Those poor choices result in more accidents — and insurance claims, which impacts everyone’s premiums (even those of more responsible drivers).

3. Vehicle theft

Auto insurance covers your vehicle even when you’re not on the road. And vehicle theft is a huge problem. Nationally, a car is stolen every two minutes, and Texas is in the top 10 states with the highest vehicle theft rates.5 Texas also ranks second in catalytic converter thefts,6 an expensive repair to manage. It can cost anywhere from $1,000 to $3,500 — or more — to replace a stolen catalytic converter. Those claims put pressure on insurance rates.

Here's what you can do

The first thing that comes to mind for drivers facing steep insurance price hikes is to cut coverage. But that also cuts the amount of protection you have from unexpected losses.

Rather than put you and your family at risk, look for other ways to trim premium costs.

Keep your credit and driving record clean.

For the best rates, you’ll need to have at least three years of clean driving. And in most states, the better your credit score, the lower your rates will be.

Choose your car wisely.

Luxury and high-performance cars tend to cost more to insure. A model’s popularity with thieves7 is also a big consideration. Research vehicles before you buy — and talk to your insurance company to understand how your new car may impact your rates.

Look for discounts.

Potential money-savers include breaks for bundling home and auto policies with the same carrier and taking a safe-driving course. You should also let your carrier know if you have lower annual mileage, and be sure to note any anti-theft devices, anti-lock brakes and sophisticated crash-avoidance technology included in your vehicle.

» Tip: Adding a teen driver8 can increase a parent’s auto premium by 50% to 100%. Driving safety courses, good student discounts, parent-teen contracts and practice driving logs may help. Some insurance companies will subsidize the cost of electronic monitoring devices parents can install in their cars to keep track of a teen’s driving habits.

The takeaway

Increased repair and replacement costs, poor driving habits and an increase in vehicle theft have put auto insurance rates on the fast track. Keeping an eye on how you drive — and what you drive — can help.

Curious to see how these increases are impacting you? Interested in getting a second opinion on your current coverage? Request an online quote* now.

Last updated March 2024

Information in this article is general in nature and for your consideration, not as financial advice. Please contact your own financial professionals regarding your specific needs before taking any action based upon this information.

RBFCU Insurance Agency LLC is a wholly-owned subsidiary of RBFCU Services LLC. RBFCU Services LLC is affiliated with Randolph-Brooks Federal Credit Union (RBFCU). Insurance products are not deposits; are not obligations of the credit union; not NCUA insured; and not guaranteed by RBFCU Insurance Agency LLC, RBFCU Services LLC or RBFCU.

RBFCU Insurance Agency is an independent insurance agency. It is the role of the RBFCU Insurance Agent to obtain quotes from multiple carriers and offer comparisons to determine adequate insurance coverage.

Insurance coverage, discounts and other features are subject to individual eligibility and availability.

*RBFCU Insurance Agency LLC contracted with Vertafore, Inc. to access a Vertafore product called Consumer Rate Quotes. (“CRQ”). By using CRQ, you agree to these Terms of Use (“Terms”). Please read these Terms carefully as they contain legal terms that govern your use of this product.

By selecting the online insurance quote option, customers/members are exclusively utilizing Vertafore, Inc.


The following sources were last accessed in March 2024.

1“Economic News Release.”,

2“What Determines the Price of an Auto Insurance Policy?” Insurance Information Institute (,

3“NHTSA Estimates Traffic Fatalities Dropped in the First Three Months of 2023.” NHTSA,

4“Insurance Council of Texas and AAA Texas Launch Statewide Survive the Drive Auto Safety Campaign as Texas Ranks First in the Nation for Worst Drivers.”,

5“‘Hot Spots’ Report Shows Vehicle Theft Rates Spiking in Different Regions of the U.S.”,

6“Catalytic Converter Thefts Surge Nationwide, According to New Report.”,

7“Dodge Muscle Cars Once Again Top HLDI’s List of Most-Stolen Vehicles.” Insurance Institute for Highway Safety (,

8“Background on: Teen Drivers.” Insurance Information Institute (,