Insurance has changed over the last 30 years, leading some to wonder: Is it cheaper now than it used to be? Inflation and changes in prices and quality of coverage can sometimes make this hard to decipher, so let’s delve into how insurance costs have changed compared to the cost of a vehicle over the last few decades.
There are many factors that affect your insurance rates. Some of those include your location, age, driving experience, and driving record. Your marital status and gender can also affect your rates.
Of course, the insurance coverage you carry and your deductibles affect your rates. The kind of car you drive is also a significant factor. In most states, drivers are required to have a minimum level of liability coverage.
Liability insurance coverage has two components: bodily injury and property damage. Most policies also contain uninsured or underinsured motorist coverage. Most states require a minimum amount of coverage for medical payments or personal injury protection (PIP).
Auto policies may include property damage coverage for both collision and comprehensive coverage. These coverages are usually subject to a deductible. Although neither is mandated by state law, they are usually required by a lender.
When considering an insurance change or auto purchase, you may want to check insurance rates by car make and model. The type of driving you do and how many miles you drive annually also influence your insurance rates.
The Cost of Vehicles Has Increased
In 1990, the average cost of a new car was $16,950. By 2018, the average cost of a new car was over $35,000, or more than twice the cost in 1990. In 1990, there were just over 191 million registered vehicles in the U.S. By 2020, that number had risen to over 276 million.
In contrast, the average auto insurance policy in 1990 was $171.87. In 2018 it had gone up to $565.97. This indicates that the rate of insurance has gone up more in comparison with the price of cars.
According to the U.S. Bureau of Labor Statistics (BLS), prices for motor vehicle insurance were 217.52% higher in 2021 versus 1990 (a $1,087.58 difference in value).
During the same period (1990-2020) the automobile itself has changed. Changes in almost all areas of car design and production have affected cost, insurance, and vehicle longevity. Many vehicles in 1990 were still the basic models that most backyard mechanics could service.
In contrast, new cars now are basically computers with connectivity, technology, and multiple safety upgrades. Standard technology in cars now includes Bluetooth, GPS, anti-theft systems, stability control, and automatic tire pressure monitoring, just to name a few.
Insurance Costs Have Increased Quickly
Between 1990 and 2020, car insurance had an average inflation rate of 3.8% per year. This indicates significant inflation. An auto insurance policy costing $500 in 1990 costs $1,587.58 in 2021 for the same vehicle and coverage.
Given that the overall inflation rate was 2.36% during this same period, inflation for car insurance was higher. There are likely many reasons for this increase. Since 1990 the number of vehicles on the road has increased significantly.
There are also changes in how we drive, including services like Lyft and Uber. Technology has made cars both safer and more expensive, with camera and sensor technology, lane-assist technology, and the rise in self-driving technology.
Technology Will Continue to Affect Car Insurance
Auto insurance is among the most purchased insurance policies. As advances in technology and mobility continue to shape the auto insurance landscape, consumers will need to understand new insurance options, such as usage-based insurance (UBI).
Recent innovations have shifted auto insurance needs and options as more consumers take advantage of ride-sharing, car-sharing, and UBI. They are also beginning to shift how some insurers price risk. For instance, UBI ties insurance costs more to actual driving habits, miles driven, and the time of day.
Insurers offering UBI products are able to monitor how people drive through installed onboard devices. Automobile technology has made vehicles more complex, with electronic components throughout the vehicle.
More Safety Features
A car with a backup camera or built-in navigation center will have more electronic parts to run these features. This technology can make even the cost of replacing a dented bumper more complex and more expensive. The repair is likely to involve more expensive parts, more complex skills to repair, and more time to perform the repair.
Cars and car insurance rates have seen an increase nationwide. New technology is one of the biggest reasons for the increase in rates, making repairs more expensive. As cars have become more connected and safer, they have increased in cost.
Increases in initial cost also mean higher repair costs. The top car insurance companies then raise rates to meet the higher cost of fixing cars after accidents.
Future Trends in Transportation
Technology will continue to impact the insurance industry. New technologies will allow auto insurance carriers to manage risk more effectively, using complex data on customers and traffic. This will allow insurers to use predictive technology to help prevent incidents and make driving safer for everyone.
In auto insurance, risk will begin to shift from drivers to artificial intelligence (AI) and the software in self-driving cars. The use of data from satellites, drones, and other real-time information will give insurers more information to use in setting rates and understanding risks.
All these factors should lead to a safer driving experience for all of us.
Teresa Johnson writes and researches for the auto insurance comparison site, QuoteInspector.com. She has a background in finance and accounting and enjoys educating readers on personal finance and insurance.
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