Are you a Massachusetts driver who's noticed a significant increase in your car insurance bill? You’re not alone. Nationwide, auto insurance costs have surged by 26% compared to 2023. This upward trend doesn’t seem to be slowing down. Let’s delve into the factors behind these rising rates and explore strategies to save on your Massachusetts auto insurance.
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Consumers pay for an insurance policy, and the insurance provider covers a claim in the event of a covered loss.
But what happens when the cost of these claims starts to skyrocket? Insurance companies are left with no choice but to increase their prices to cover these expenses. This means that as a consumer, you're likely to see a significant hike in your car insurance costs. In fact, insurance companies are now paying out more in claim expenses than ever before.
According to S&P Global, publicly traded car insurance companies experienced a combined ratio of 111.8% in 2022. This means that for every $1.00 of revenue, these companies spent $1.12 in expenses (yikes). In fact, these insurance providers have been operating at a loss in seven of the last ten years. The reason? Claim payouts are rising.
From 2018 to 2022, the annual losses incurred by personal auto insurance increased from $150.5 billion to $208.9 billion1. This is a 39% increase in the total amount paid in personal auto claims nationwide by all insurance providers in a five-year span.
The cost to repair or replace damaged vehicles has risen substantially, and insurance providers are adjusting prices to keep up with increased costs.
Vehicles are more expensive to repair and maintain today than in prior years. Modern vehicles are engineered to absorb the brunt of the damage in a collision, better protecting occupants but resulting in more damage to the car itself.
With more damage comes higher repair costs. The overall cost of body shop repairs has increased. From 2016 to 2020, the average Body Shop Sale per Repair Order fell from $741.78 to $719.64. In 2023, it had risen to $1070.58 (source: NADA 2023 Annual Financial Profile of America’s Franchised New Car Dealerships).
Even minor repairs—for example, windshield replacements — are more expensive than before. Modern vehicles feature windshields with advanced driver assistance systems or heads-up display technology that connects to the windshield. These technologies require a particular replacement windshield and sensors that require recalibration. What was once a $200 - $300 repair can now cost more than $1,000.
The additional costs of these minor repairs certainly add up. And not every vehicle can be repaired after an accident. In a more severe collision, the car may be beyond repair. The cost of replacing vehicles has also increased.
In the event of a total loss, the insurance company pays out the actual cash value of the affected car. This will be the value of the vehicle, less depreciation. The claim payout will roughly be the amount to purchase the same year, make, and model of the vehicle, with similar miles, trim package, and vehicle condition.
The used car market impacts the value of this replacement vehicle. And used car prices have increased substantially in the last four years. In fact, used car prices increased by 32% from May 2020 to May 20242.
The new car market isn’t much different. The Consumer Price Index for new vehicles increased by approximately 19% from May 2021 to May 20243. In the prior five years (May 2016 to May 2021), the Consumer Price Index for purchasing a new vehicle increased only by <1%.
An increasing number of newly registered vehicles in Massachusetts are all-electric and hybrid.
Have you seen more Teslas driving on I-95? Your eyes are not deceiving you. There has been an uptick in the number of all-electric and hybrid vehicles. As of Jan. 1, 2024, 5.8% of all actively registered private passenger autos in Massachusetts are electric or hybrid. In 2020, these vehicles only accounted for 2.6% of all registered vehicles. Fully electric and hybrid vehicles may require specialized auto mechanics and hard-to-come-by replacement parts for repairs. And overall repair costs will continue to rise as more and more all-electric and hybrid vehicles are added to the roads.
A note from the author: In a future article, we’ll discuss insurance trends for all-electric and hybrid vehicles. Two fascinating findings about all-electric cars that we’ll undoubtedly conduct a deeper dive into:
Physical damage claims are not the only growing expense for insurance providers. Liability coverage encompasses property damage, injury to another party, and legal defense costs. Here is a simplified example of liability insurance: Janice’s foot slips off the brake pedal, and her vehicle strikes Frank’s vehicle. Janice would be responsible for Frank’s medical expenses and any repairs to his car. Assuming Janice’s Massachusetts auto insurance policy has sufficient liability coverage, her car insurance provider would likely cover these expenses.
Liability accounts for more than half of the annual losses incurred by auto insurance companies. In 2022, total liability losses totaled $117.9 billion, the first time they had exceeded $100 billion.
Car insurance providers closely monitor their claim costs to determine any needed pricing adjustments. The insurance rate changes are submitted to the Massachusetts Division of Insurance for review, but approval is not guaranteed. Once the new rates take effect, it takes 12 months for the prices to roll out to all of the provider's policies. The entire process can take 18 months, resulting in a pricing lag.
As claim expenses continue to rise, car insurance costs will increase. Increasing repair costs will primarily drive this. Repairs will become more costly as safety systems and amenities become more sophisticated. Massachusetts drivers can expect to continue to experience significant insurance cost increases.
Despite the overall trend of increasing insurance prices, there are still avenues for you to reduce your car insurance bill. It's important to remember that not all hope is lost! There are strategies you can employ to potentially save on your car insurance.
Let’s explore some potential ways to save on your car insurance bill. You'll be equipped with valuable insights to help you make informed decisions about your car insurance.
If you want to save on your insurance bill today, there are a few options. Please consult a licensed Massachusetts insurance agent before making any changes to your insurance.
Consider raising your collision deductible. Your deductible is the amount you are obligated to pay out of pocket in the event of an insurable loss. With collision coverage, this most commonly comes into play for at-fault accidents. It is also one of your car insurance policy's more expensive line items. If you currently have a collision deductible of $500, consider increasing it to $1,000 to reduce your insurance payment. Just be aware that you may pay more out of pocket in the event of an at-fault accident.
Consider removing collision coverage altogether if your car is older and has little resale value.
Substitute transportation coverage provides a rental vehicle when your vehicle is no longer driveable due to a covered loss. Individuals who don’t use their car regularly or have access to another vehicle may want to consider removing this coverage from their policy.
Many discounts are available for Massachusetts drivers, though only some providers offer some discounts. Be sure to review potential discounts with your licensed Massachusetts insurance agent. Let’s review some standard car insurance discounts available to Massachusetts residents.
You can save as much as 20% on your Massachusetts car insurance policy by bundling it with other insurance products, such as home insurance, renters insurance, or motorcycle insurance. Most providers offer a discount just for having a home insurance or renters insurance policy, even if placed with a competing provider.
Do you have multiple vehicles within your household that are listed on separate car insurance policies? If so, you can likely save quite a bit overall by combining each of them onto a single auto insurance policy.
To qualify for this discount, you must download an app on your smartphone and allow the auto insurance provider to monitor your driving habits. The most common monitored habits are hard braking, night-time driving, mileage, and phone usage (distracted driving). Each insurance provider has a unique program, but generally, you can expect 5% off your bill just for agreeing to the program, and that discount can increase to upwards of 40%.
Some workplaces and membership groups offer discounts to their members. For example, you may be eligible for an additional discount on your car insurance if you’ve maintained an active AAA membership for at least six months.
If you make your monthly insurance payment with a credit card or by mailing in a check, you can save up to $60 a year by switching to a monthly auto-pay plan.
Some providers will offer a significant discount if you opt for a paid-in-full billing plan.
Shop your insurance. Things change over time – vehicle changes, driving experience, drivers in the household, and coverage needs. These are all factors that insurance companies utilize to determine the price they would charge you for a policy. And each company prices them differently. There may be a provider with a more competitive offering for the coverage you need than your current car insurance policy.
A word of caution if you decide to switch providers. Massachusetts car insurance providers are permitted to collect a cancellation penalty, called a short-rate penalty, when the policy is canceled before the end of the policy period. The short-rate penalty is typically 10% of the unearned policy premium but can be up to 15%.
Applying additional discounts and adjusting policy coverages are actions that you can take today to reduce your auto insurance costs. These changes may offer a slight reprieve. Let’s review some of the primary rating factors that significantly impact how your policy's cost is determined.
Experienced drivers can expect lower insurance costs than newly licensed drivers. Once a driver has had an active Massachusetts driver's license for six years, they are considered an experienced operator. Many insurance providers offer better pricing the longer you’ve held an active driver's license.
Having your license for a long time is good for insurance pricing; having a good driving record is even better. Motor vehicle accidents and moving violations that appear on your driving record can increase the cost of your insurance for up to six years. It’s not just avoiding accidents and speeding tickets. Receiving an inspection sticker violation can add two points to your driving record.
All household members' driving experience and driving history will impact car insurance costs for everyone in the home.
The vehicle's garaging location certainly impacts your insurance costs. The garaging location is where the car is most commonly parked. For most of us, this is our residential address.
In general, drivers living in areas with a high population density can expect to pay more for insurance than those living in low-population-density communities. Williamstown residents are likely paying less for car insurance than Norwood residents.
The vehicle you are insuring has an impact on insurance costs. Expensive vehicles are certainly more costly to insurance than less expensive vehicles, but those are not the only factors. Here are some vehicle attributes that can make a vehicle more expensive to insure:
Maintaining active insurance coverage with appropriate policy limits will result in better options.
Individuals who have allowed their policy to lapse or have insufficient policy limits will likely experience higher insurance costs.
Oak Grove Insurance is an independent insurance agency located in Canton, MA. We represent many insurance providers, allowing us to shop rates on your behalf. Talk to a licensed insurance agent at Oak Grove Insurance and start saving on your car insurance policy today.
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Massachusetts car insurance is more expensive due to increasing claim costs. Insurance companies face higher expenses for claims, which they offset by raising premiums. Factors such as rising repair costs, more expensive vehicles, and increased liability claims contribute to this trend.
Key factors include the increased cost of vehicle repairs and replacements, more expensive modern vehicles, higher liability claims, and a significant number of all-electric and hybrid vehicles that require specialized maintenance.
The cost of vehicle repairs has increased significantly due to advanced technology in modern cars. Repairs that used to be relatively inexpensive are now more costly because of components like advanced driver assistance systems and specialized windshields, driving up insurance premiums.
Electric and hybrid vehicles tend to cause more damage in collisions and often require specialized parts and repairs, which are more expensive. Additionally, drivers transitioning to electric vehicles may be more prone to accidents in the first year, increasing claim costs.
You can reduce your car insurance premiums by increasing your collision deductible, removing unnecessary coverages like substitute transportation, applying for discounts (e.g., bundle, multi-vehicle, telematics, affiliations), and shopping around for better rates.
A telematics discount involves using an app to monitor your driving habits, such as braking, nighttime driving, mileage, and phone usage. Allowing your insurance provider to track this data can earn you a discount on your premiums, often starting at 5% and potentially increasing to 40%.
Experienced drivers with clean driving records generally pay lower premiums. Insurance companies consider factors like the length of time a driver has been licensed and their history of accidents or violations. A good driving record can significantly reduce insurance costs.
Yes, the garaging location, or where your car is primarily parked, affects your insurance rates. Drivers in high-population areas typically face higher premiums due to increased risks of accidents and theft than those in low-population areas.
When shopping for car insurance, consider factors such as coverage options, policy limits, deductibles, discounts, and the insurance provider's reputation. Comparing quotes from multiple providers can help you find the best rate for your needs.
Other ways to save on car insurance include maintaining continuous coverage, avoiding lapses in your policy, opting for billing plan discounts like auto-pay, and ensuring all household members have good driving records. Additionally, consider bundling insurance products and exploring any affiliations or memberships for potential discounts.
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Sources
1https://www.iii.org/fact-statistic/facts-statistics-auto-insurance
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