9 ms·

Auto insurance prices have gone nuts

25 points by jmsflknr 3y ago

dopylitty 3y ago
There's an interesting podcast episode here[0] (transcript at [1]) arguing that car insurance in the US is actually too cheap because it doesn't cover the costs of car crashes, particularly the ever increasing healthcare costs. It also really gets into how insurance works in the case of an accident and covers some things I hadn't known about such as how subrogation works. Be warned it does start with a very sad story of a toddler who was killed by a driver. 0: https://thewaroncars.org/2024/03/19/122-car-insurance-is-too-cheap/ https://thewaroncars.org/2024/03/19/122-car-insurance-is-too... 1: https://thewaroncars.org/episode-122-car-insurance-is-too-cheap-final-web-transcript/ https://thewaroncars.org/episode-122-car-insurance-is-too-ch...
- avidiax 3y ago
  > Using figures from 2019, the study looked at the direct cost of car crashes—everything from the price of emergency response, medical expenses, court fees, congestion, the cost of property damage, you name it. NHTSA found that the total hit to the economy in just that one year was $340 billion. > The NHTSA study also looked at broader quality of life costs—things like what happens when a family’s primary breadwinner is killed, or when someone has to adjust to a life-altering injury. Adding those impacts brought the total cost of societal harm from motor vehicle crashes to $1.4 trillion. There are 228 million drivers in the US. Assuming no cost to administer the insurance, just the first figure is: 340 billion / 228.2 million = $1,490/year/driver and the 2nd figure is 1.4 trillion / 228.2 million = $6,135/year/driver Essentially, drivers would need to, on average, pay $511/month to completely cover the damages caused in auto crashes. And that's per driver, so a household with 2 drivers would chip in $1022/mo.
  - kelipso 3y ago
    Accounting for negative externalities but not positive externalities...
    - fulafel 3y ago
      Accounting for one kind of externality, but this is missing the climate catastrophe, and other costs of car culture. What are the major positive externalities? (Value enjoyed by the car user isn't an externality)
      - avidiax 3y ago
        I suppose that without cars, there would be less economic productivity outside cities. You would not have mass transit in the countryside, so you'd be limited to horse and carriage, rickshaws, etc.
        kelipso 3y ago
        And since cars increase economic productivity, car insurance should be subsidized.
        avidiax 3y ago
        The status quo is not that the insurance is subsidized, however. The negative externalities are being born by individual victims. A subsidy would be that the government pays for all those unfunded individual externalities out of taxpayer money, which means that every driver has effectively infinite coverage but pays only the state minimums.
        dzhiurgis 3y ago
        State insurance tax would be nice, but only cover to median car amount. Everything over it - insure yourself if you wish to.
        fulafel 3y ago
        Is this an externality? It benefits people who own cars. (It's far from clear of course that public transit would be missing, there used to be public transit in small towns before everybody got cars in many places. Horses are also unlikely to replace bikes.)
  - parineum 3y ago
    Those other services are paid for by taxes. The tempting response to this will be thT those taxes could be lower, saving non-drivers money. However, the taxes may not be paid by drivers but all people benefit from drivers existing such that the economic impact of forcing only drivers to pay for these things will end up being priced into all goods and services. Essentially, government services paid for by taxes function very similarly to an insurance pool.
- mindslight 3y ago
  The situation it lays out, where the $100k of other driver's liability coverage isn't enough to cover their damages (including what health "insurance" paid out) - isn't that exactly what the "underinsured driver" line item is for? Also isn't the main reason you never cash such a check from an insurance company is that it's an offer for a final settlement, or at least could be construed as such, even though you might be owed much more? I do agree that it's a problem for insurance companies to be able to set upper limits on coverage, after which they walk away. The whole point of insurance is to cover long tail risk. If the area under the chopped off long tail is really that large, then that means a lot of damages are just currently being dropped on the floor.
  - nradov 3y ago
    This is not an actual problem. If an insurance company offers a settlement then you can always attempt to negotiate for more. Auto insurers offer a range of liability coverage limits; if a customer selects minimum coverage then that's hardly an insurance issue.
smileysteve 3y ago
Auto insurance feels like one of the products inflated slower than it should have; mostly that so may drivers were under insured despite laws requiring insurance, that uninsured motorist insurance became a large part of policies. Add in cash for clunkers, then pandemic spending on autos. And moving from 4 year to 6 year loans. Most states don't have road inspections either, so a dangerous tint, bald tires, non existent brakes, broken suspension, and a check engine light likely accompany the underinsured motorist.
- FireBeyond 3y ago
  > Add in cash for clunkers Huh? Cash For Clunkers ENDED nearly sixteen years ago. Trying to paint that as a reason why auto insurance is higher now is a poor justification. Cash for Clunkers resulted in not just removing fuel inefficient cars from the road, but they ended being replaced with newer, generally safer vehicles.
  - mistrial9 3y ago
    no - here in California there was an unsolicited notice sent out last week for a 1991 Toyota IIR .. they offer some hundreds of dollars in print, from some agency of the State of California secondly the auto in question is a simple 4-cylinder design, manual shift and no electronics in the two doors. A definition of safety that includes feedback msgs while driving, or constant location tracking.. is something about which reasonable people may disagree.
    - chomp 3y ago
      Don’t muddle terms, cash for clunkers specifically ended in 2009. Cite the Californian program if you’re referring to that.
      - jbboehr 3y ago
        Sounds like it's probably the Consumer Assistance Program Vehicle Retirement [0] . [0]: https://www.bar.ca.gov/consumer/consumer-assistance-program/cap-vehicle-retirement-program https://www.bar.ca.gov/consumer/consumer-assistance-program/...
tekla 3y ago
Insurance finally catching up to the real costs of insuring drivers
- whiterknight 3y ago
  The real costs of theft and personal injury lawsuits.
bdjsiqoocwk 3y ago
This caught my eye > Then there’s also the the objectively atrocious driving record of Americans. I think as in most things, the higher the penetration, the worse the average will be. If you give every moron in the country a car, the average will be pretty awful, the us just has high penetration. As a European it's always shocked me that in the us even borderline retarded people have cars. In Europe that's less so the case because those people usually can't afford to buy a car.
- overstay8930 3y ago
  Also the penalties are much more severe in Europe. In Europe you can get thousands in fines automatically if you’re speeding, meanwhile that’s basically a standard DUI plea deal in the Midwest. People just don’t give a duck about following the rules when driving in the US unless police are around, even then in some places there are rules where police can’t even stop you for minor infractions so it’s chaos in some areas.
  - StopHammoTime 3y ago
    I think this plays a huge part as well. My wife and I were watching an episode of the US cop show “The Rookie” and they casually discussed paying a ticket for driving SEVENTY MILES OVER THE SPEED LIMIT. I went and checked and in LA the cost is about $500. This blew my mind. In Australia, you are very at risk for jail for going over anything above 40km/h which is about 25mph. It’s considered reckless/dangerous driving. Your license would also be suspended for six months. I think we have excessive fines but the US seems to go in the opposite direction.
    - nradov 3y ago
      I think you misunderstood. Under the California vehicle code that would usually be charged as reckless driving rather than a simple moving violation. https://www.eastonlawoffices.com/blog/reckless-driving-examples-california/ https://www.eastonlawoffices.com/blog/reckless-driving-examp...
    - memling 3y ago
happytiger 3y ago
Rising cost of repairs are causing this as new car are becoming so complex and are so difficult to repair they are causing catastrophic loss to insurance companies. Electric cars lead this change with eye watering repair costs, but just look at the cost of replacing the headlight on a 2024 f-150 — it is almost 1400 bucks, plus labor. Each. So a minor fender bender is thousands and for insurance you have to use approved parts, which are most always OEM and painfully expensive. Cars are complicated and expensive to repair and getting more complicated. And manufacturers are doing strange things. Like the 2024 Lexus GX has a hutch included in every model (yay, finally), but then it sticks out several inches and is welded to the frame so even a minor fender bender can total the car — it’s the first thing that gets nailed when someone read ends it and it goes straight to the frame. That’s not a good plan, and could (in my opinion definitely will) lead to totaling the car from minor fender benders. And electric cars in general are even more expensive to repair. https://www.repairerdrivennews.com/2022/07/12/ccc-report-repair-costs-turnaround-times-higher-for-evs/ https://www.repairerdrivennews.com/2022/07/12/ccc-report-rep... It all comes out in higher insurance costs.
- jjtheblunt 3y ago
  > And electric cars in general are even more expensive to repair. Something has gone crazy over the past ten years: my 2014 BMW i3 over 79,900+ miles cost all of about $200 in maintenance, not including occasional new tires. EVs can be very frugal. Is it profiteering and collusion now?
  - aeternum 3y ago
    Probably, Elon has some quote about how creating a successful new car company isn't hard because cars are hard to design. It's hard because cars are generally sold with razor thin margins and all the money is made selling parts and service. Seems crazy but perhaps this is actually true.
    - jjtheblunt 3y ago
      (Upvoted) i think about exactly what you wrote, now with a 2024 electric BMW, in that clearly there is an initial excess cost (not because of being BMW) over similar ICE models (like i7 vs 7 series, m440 vs i4, etc.). And i think that excess cost passed to the buyer for electric over ICE effects includes the profit an ICE would have "earned" over time, because ev models have significantly simpler and less costly powertrains to build, and service. But, i can’t back up that guess with data.
mig39 3y ago
I always thought fender-benders were a rounding error, especially for large insurance companies. It's the catastrophic accidents, involving deaths that cost a lot of money.
- randomdata 3y ago
  An increasing number of thefts is the premium cost driver right now, though. In this little part of the world, the number of theft claims have increased by more than 300% within the span of just a few years.
- jmalicki 3y ago
  As a Californian, I experienced a lot of trouble getting quotes for collision and comprehensive in the past year for reasonable prices, if at all - everyone was happy with liability, but it sounded like general property damage (fires, floods, landslides, etc.) for autos led a lot of companies to exit the California market or be very selective. Of course higher repair costs due to general inflation, newer cars having lots of sensors etc. add to it as well, but the agents I talked to specifically cited general comprehensive (not collision or liability) claim concerns as one of the main reasons.
- pkulak 3y ago
  Just look at what they charge. At least half my policy is collision. I maxed out liability at half a million and it’s about 10% of my bill.
  - manuelmoreale 3y ago
    Wait a second, are you saying your car insurance will cover damages for up to half a million?
    - pkulak 3y ago
      Yes. I’d like more, but that was the most I could do. I think the minimum is 25 grand. If I get run over by a car, I do not think 25 grand will quite make up that loss to my family.
rapjr9 3y ago
Maybe auto insurers have realized that as EV's take over and batteries improve the costs will come down and the efficiencies of EV's will reduce both the cost of cars and the cost of repairs, hence the insurers will have a smaller slice of a smaller pie and thus are raising prices now to get some profit before the entire business downsizes.
- nradov 3y ago
  That's not how the insurance industry works. Furthermore, EVs aren't necessarily cheaper to repair or replace: rather the opposite.
- bdcravens 3y ago
  The kinds of EV repairs insurance companies are concerned with are likely not cheaper. Less third-party parts, fewer technicians with expertise, and some models like Rivians are ridiculously expensive for even basic body work. I assume they have a higher risk of being a total loss (especially if the main battery is damaged)
- deleted 3y ago
  [deleted]

25 points by jmsflknr 3y ago

There's an interesting podcast episode here[0] (transcript at [1]) arguing that car insurance in the US is actually too cheap because it doesn't cover the costs of car crashes, particularly the ever increasing healthcare costs. It also really gets into how insurance works in the case of an accident and covers some things I hadn't known about such as how subrogation works. Be warned it does start with a very sad story of a toddler who was killed by a driver. 0: https://thewaroncars.org/2024/03/19/122-car-insurance-is-too-cheap/ https://thewaroncars.org/2024/03/19/122-car-insurance-is-too... 1: https://thewaroncars.org/episode-122-car-insurance-is-too-cheap-final-web-transcript/ https://thewaroncars.org/episode-122-car-insurance-is-too-ch...

avidiax 3y ago
> Using figures from 2019, the study looked at the direct cost of car crashes—everything from the price of emergency response, medical expenses, court fees, congestion, the cost of property damage, you name it. NHTSA found that the total hit to the economy in just that one year was $340 billion. > The NHTSA study also looked at broader quality of life costs—things like what happens when a family’s primary breadwinner is killed, or when someone has to adjust to a life-altering injury. Adding those impacts brought the total cost of societal harm from motor vehicle crashes to $1.4 trillion. There are 228 million drivers in the US. Assuming no cost to administer the insurance, just the first figure is: 340 billion / 228.2 million = $1,490/year/driver and the 2nd figure is 1.4 trillion / 228.2 million = $6,135/year/driver Essentially, drivers would need to, on average, pay $511/month to completely cover the damages caused in auto crashes. And that's per driver, so a household with 2 drivers would chip in $1022/mo.
- kelipso 3y ago
  Accounting for negative externalities but not positive externalities...
  - fulafel 3y ago
    Accounting for one kind of externality, but this is missing the climate catastrophe, and other costs of car culture. What are the major positive externalities? (Value enjoyed by the car user isn't an externality)
    - avidiax 3y ago
      I suppose that without cars, there would be less economic productivity outside cities. You would not have mass transit in the countryside, so you'd be limited to horse and carriage, rickshaws, etc.
      - kelipso 3y ago
        And since cars increase economic productivity, car insurance should be subsidized.
        avidiax 3y ago
        The status quo is not that the insurance is subsidized, however. The negative externalities are being born by individual victims. A subsidy would be that the government pays for all those unfunded individual externalities out of taxpayer money, which means that every driver has effectively infinite coverage but pays only the state minimums.
        dzhiurgis 3y ago
        State insurance tax would be nice, but only cover to median car amount. Everything over it - insure yourself if you wish to.
      - fulafel 3y ago
        Is this an externality? It benefits people who own cars. (It's far from clear of course that public transit would be missing, there used to be public transit in small towns before everybody got cars in many places. Horses are also unlikely to replace bikes.)
- parineum 3y ago
  Those other services are paid for by taxes. The tempting response to this will be thT those taxes could be lower, saving non-drivers money. However, the taxes may not be paid by drivers but all people benefit from drivers existing such that the economic impact of forcing only drivers to pay for these things will end up being priced into all goods and services. Essentially, government services paid for by taxes function very similarly to an insurance pool.
mindslight 3y ago
The situation it lays out, where the $100k of other driver's liability coverage isn't enough to cover their damages (including what health "insurance" paid out) - isn't that exactly what the "underinsured driver" line item is for? Also isn't the main reason you never cash such a check from an insurance company is that it's an offer for a final settlement, or at least could be construed as such, even though you might be owed much more? I do agree that it's a problem for insurance companies to be able to set upper limits on coverage, after which they walk away. The whole point of insurance is to cover long tail risk. If the area under the chopped off long tail is really that large, then that means a lot of damages are just currently being dropped on the floor.
- nradov 3y ago
  This is not an actual problem. If an insurance company offers a settlement then you can always attempt to negotiate for more. Auto insurers offer a range of liability coverage limits; if a customer selects minimum coverage then that's hardly an insurance issue.

smileysteve 3y ago

Auto insurance feels like one of the products inflated slower than it should have; mostly that so may drivers were under insured despite laws requiring insurance, that uninsured motorist insurance became a large part of policies. Add in cash for clunkers, then pandemic spending on autos. And moving from 4 year to 6 year loans. Most states don't have road inspections either, so a dangerous tint, bald tires, non existent brakes, broken suspension, and a check engine light likely accompany the underinsured motorist.

FireBeyond 3y ago
> Add in cash for clunkers Huh? Cash For Clunkers ENDED nearly sixteen years ago. Trying to paint that as a reason why auto insurance is higher now is a poor justification. Cash for Clunkers resulted in not just removing fuel inefficient cars from the road, but they ended being replaced with newer, generally safer vehicles.
- mistrial9 3y ago
  no - here in California there was an unsolicited notice sent out last week for a 1991 Toyota IIR .. they offer some hundreds of dollars in print, from some agency of the State of California secondly the auto in question is a simple 4-cylinder design, manual shift and no electronics in the two doors. A definition of safety that includes feedback msgs while driving, or constant location tracking.. is something about which reasonable people may disagree.
  - chomp 3y ago
    Don’t muddle terms, cash for clunkers specifically ended in 2009. Cite the Californian program if you’re referring to that.
    - jbboehr 3y ago
      Sounds like it's probably the Consumer Assistance Program Vehicle Retirement [0] . [0]: https://www.bar.ca.gov/consumer/consumer-assistance-program/cap-vehicle-retirement-program https://www.bar.ca.gov/consumer/consumer-assistance-program/...

tekla 3y ago

Insurance finally catching up to the real costs of insuring drivers

whiterknight 3y ago
The real costs of theft and personal injury lawsuits.

bdjsiqoocwk 3y ago

This caught my eye > Then there’s also the the objectively atrocious driving record of Americans. I think as in most things, the higher the penetration, the worse the average will be. If you give every moron in the country a car, the average will be pretty awful, the us just has high penetration. As a European it's always shocked me that in the us even borderline retarded people have cars. In Europe that's less so the case because those people usually can't afford to buy a car.

overstay8930 3y ago
Also the penalties are much more severe in Europe. In Europe you can get thousands in fines automatically if you’re speeding, meanwhile that’s basically a standard DUI plea deal in the Midwest. People just don’t give a duck about following the rules when driving in the US unless police are around, even then in some places there are rules where police can’t even stop you for minor infractions so it’s chaos in some areas.
- StopHammoTime 3y ago
  I think this plays a huge part as well. My wife and I were watching an episode of the US cop show “The Rookie” and they casually discussed paying a ticket for driving SEVENTY MILES OVER THE SPEED LIMIT. I went and checked and in LA the cost is about $500. This blew my mind. In Australia, you are very at risk for jail for going over anything above 40km/h which is about 25mph. It’s considered reckless/dangerous driving. Your license would also be suspended for six months. I think we have excessive fines but the US seems to go in the opposite direction.
  - nradov 3y ago
    I think you misunderstood. Under the California vehicle code that would usually be charged as reckless driving rather than a simple moving violation. https://www.eastonlawoffices.com/blog/reckless-driving-examples-california/ https://www.eastonlawoffices.com/blog/reckless-driving-examp...
  - memling 3y ago

happytiger 3y ago

Rising cost of repairs are causing this as new car are becoming so complex and are so difficult to repair they are causing catastrophic loss to insurance companies. Electric cars lead this change with eye watering repair costs, but just look at the cost of replacing the headlight on a 2024 f-150 — it is almost 1400 bucks, plus labor. Each. So a minor fender bender is thousands and for insurance you have to use approved parts, which are most always OEM and painfully expensive. Cars are complicated and expensive to repair and getting more complicated. And manufacturers are doing strange things. Like the 2024 Lexus GX has a hutch included in every model (yay, finally), but then it sticks out several inches and is welded to the frame so even a minor fender bender can total the car — it’s the first thing that gets nailed when someone read ends it and it goes straight to the frame. That’s not a good plan, and could (in my opinion definitely will) lead to totaling the car from minor fender benders. And electric cars in general are even more expensive to repair. https://www.repairerdrivennews.com/2022/07/12/ccc-report-repair-costs-turnaround-times-higher-for-evs/ https://www.repairerdrivennews.com/2022/07/12/ccc-report-rep... It all comes out in higher insurance costs.

jjtheblunt 3y ago
> And electric cars in general are even more expensive to repair. Something has gone crazy over the past ten years: my 2014 BMW i3 over 79,900+ miles cost all of about $200 in maintenance, not including occasional new tires. EVs can be very frugal. Is it profiteering and collusion now?
- aeternum 3y ago
  Probably, Elon has some quote about how creating a successful new car company isn't hard because cars are hard to design. It's hard because cars are generally sold with razor thin margins and all the money is made selling parts and service. Seems crazy but perhaps this is actually true.
  - jjtheblunt 3y ago
    (Upvoted) i think about exactly what you wrote, now with a 2024 electric BMW, in that clearly there is an initial excess cost (not because of being BMW) over similar ICE models (like i7 vs 7 series, m440 vs i4, etc.). And i think that excess cost passed to the buyer for electric over ICE effects includes the profit an ICE would have "earned" over time, because ev models have significantly simpler and less costly powertrains to build, and service. But, i can’t back up that guess with data.

mig39 3y ago

I always thought fender-benders were a rounding error, especially for large insurance companies. It's the catastrophic accidents, involving deaths that cost a lot of money.

randomdata 3y ago
An increasing number of thefts is the premium cost driver right now, though. In this little part of the world, the number of theft claims have increased by more than 300% within the span of just a few years.
jmalicki 3y ago
As a Californian, I experienced a lot of trouble getting quotes for collision and comprehensive in the past year for reasonable prices, if at all - everyone was happy with liability, but it sounded like general property damage (fires, floods, landslides, etc.) for autos led a lot of companies to exit the California market or be very selective. Of course higher repair costs due to general inflation, newer cars having lots of sensors etc. add to it as well, but the agents I talked to specifically cited general comprehensive (not collision or liability) claim concerns as one of the main reasons.
pkulak 3y ago
Just look at what they charge. At least half my policy is collision. I maxed out liability at half a million and it’s about 10% of my bill.
- manuelmoreale 3y ago
  Wait a second, are you saying your car insurance will cover damages for up to half a million?
  - pkulak 3y ago
    Yes. I’d like more, but that was the most I could do. I think the minimum is 25 grand. If I get run over by a car, I do not think 25 grand will quite make up that loss to my family.

rapjr9 3y ago

Maybe auto insurers have realized that as EV's take over and batteries improve the costs will come down and the efficiencies of EV's will reduce both the cost of cars and the cost of repairs, hence the insurers will have a smaller slice of a smaller pie and thus are raising prices now to get some profit before the entire business downsizes.

nradov 3y ago
That's not how the insurance industry works. Furthermore, EVs aren't necessarily cheaper to repair or replace: rather the opposite.
bdcravens 3y ago
The kinds of EV repairs insurance companies are concerned with are likely not cheaper. Less third-party parts, fewer technicians with expertise, and some models like Rivians are ridiculously expensive for even basic body work. I assume they have a higher risk of being a total loss (especially if the main battery is damaged)
deleted 3y ago
[deleted]