Here’s a New Sign Car Insurance Prices Are Out of Control

A 22% year-over-year increase in auto insurance costs is pushing more car owners to shop around for cheaper policies — or sometimes to take even more drastic measures.

More customers are shopping around and switching auto insurance companies so far this year, indicating that folks are finding better — or cheaper — alternatives to their previous insurers, according to a new report from J.D. Power and TransUnion.

Another (more surprising) effect of the surge in car insurance costs is a trend of drivers returning newly-purchased cars upon realizing that their monthly vehicle costs are too high when an expensive policy is factored in.

How car insurance customers are dealing with rising prices

In March, the rate of people shopping around for new car insurance rose to 13.5%, which is the highest level since J.D. Power began tracking this data in September 2020.

High prices appear to be the reason for the record level of browsing, as a growing share of car insurance shoppers are citing cost-related factors as the reason they’re looking at their options.

In the first quarter of 2024, 14.6% of insurance shoppers said the main reason they were shopping was that their rate increased (unrelated to a claim). That share has nearly doubled in the last two years, according to J.D. Power.

Meanwhile, the share who said they were shopping because their rate was too high increased from 16.9% to 21.3%.

“These reasons for shopping are indicative of a more ‘active’ shopper, seeking to switch insurers, rather than passively price checking,” J.D. Power said in the report.

The 30-day switch rate — which refers to the number of people changing car insurance companies — increased to 3.9% in the first quarter, up from 3.6% at the end of 2023, according to J.D. Power.

Car insurance prices are soaring

According to Kelley Blue Book (KBB), the average cost of car insurance (for a six-month policy) is $828, up from $677 a year ago.

Due to these higher costs, the car valuation company reports that some drivers of newly-purchased vehicles are actually bringing their cars back to the dealership when they find out how much insurance costs.

“We’re hearing from a number of shoppers that they’re declining to buy a car — or returning one — because they can afford the car, but not the insurance for it,” Sean Tucker, senior editor at KBB, told Reuters.

Prices are rising because the cars that are on the road today are more expensive to repair and replace compared to a few years ago. Insurers are facing a high number of costly claims, and they’re passing these expenses along to customers.

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