As auto insurance premiums in the U.S. rise by over 20% annually, some states, including California, are expected to see premiums soar by more than 50% by the end of the year. The sharp increase in natural disaster-related compensation, coupled with rising new car prices, repair costs, and a surge in traffic accidents, has created a perfect storm for escalating auto insurance rates.

According to the insurance industry on the 2nd, the national average auto insurance premium for the first half of this year was $2,329 and is projected to rise by 6.01% to $2,469 by the end of the year. Last year, the national average auto insurance premium jumped 24%, and this year it is expected to rise by another 22%. This 22% increase is ten times the rate of the Consumer Price Index (CPI). The U.S. CPI, which soared to 9.1% in June 2022 during the COVID-19 pandemic, the highest in 41 years, has now moderated to 2.9% as of July this year.

According to Fox Business, Maryland is the state with the highest auto insurance premiums nationwide. As of June this year, the average auto insurance premium in Maryland was $3,400, a staggering 43% increase from the previous year. It is expected to rise by another $350 by the end of this year, reaching $3,748. Washington D.C. residents will face a similar burden, with premiums rising by an additional $350 to $3,748 compared to the first half of the year. Among the regions with the highest projected rate increases by year-end, Minnesota is expected to see a 55% spike, California 54%, and Missouri 51%, making them the three states with increases exceeding 50%. In California, where the current average auto insurance premium is $1,666, a 54% increase by year-end would push the average premium to $2,681. In Minnesota, where the current average premium is $1,492, it is projected to surge by 55% to $2,315 by year-end. In Missouri, the current $1,582 premium is expected to rise by 51% to $2,386.

Experts attribute the annual sharp rise in U.S. auto insurance premiums to several factors, including increased costs for natural disaster compensation, inflation-driven vehicle price hikes, a surge in traffic accidents, rising theft rates, and increased insurance fraud.

Chase Gardner, a data manager at insurance research firm Insurify, noted that "one of the reasons for the sharp rise in premiums is the severe climate change," emphasizing that "Minnesota alone recorded $1.8 billion in damage last year from storms accompanied by baseball-sized hail." In California, the freezing of auto insurance rate increases during the COVID-19 period has backfired. Insurance companies that have frozen rates for years are now demanding double-digit rate hikes to recover losses, or are exiting the state altogether. Gardner explained, "California has frozen premiums for a longer period than other states, but traffic accidents have increased, and inflation in vehicle prices and maintenance costs has soared. As a result, insurance companies are now pushing for more aggressive premium increases to recover years of losses."

As auto insurance premiums rise, homeowners' insurance rates are also soaring, further straining consumers' budgets. On August 29th, the California state government approved a 34.1% increase in homeowners' insurance rates submitted by Allstate. This marks the largest insurance rate hike in California in the past three years. The approved rate increase will take effect in November, affecting over 350,000 Allstate homeowners insurance policyholders in California, who will soon face significantly higher insurance bills.



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