is becoming unaffordable for the average person, as high premiums force more than half of them to cut spending in other areas of their lives and push many others to settle for less insurance coverage than they think they might need.

It’s just one element of a worsening car ownership affordability crisis that includes runaway prices for new vehicles, parts, and maintenance and

repair work

But auto insurance has set the pace. It

rose

18% annually in July, the most in at least four decades, as insurers

scramble to keep pace

with related inflation and a surge in severe accidents. Car insurance has now jumped 26% in the past two years.

That’s added to the pressure on Americans’ budgets as prices have risen for everything from beef to airline tickets. In a survey of 1,210 car owners by

Jerry

, 86% of respondents said car insurance caused them at least some financial stress in the past 12 months, and 14% said the stress level was “high” or “extreme.”

It’s a longer-term trend. Premiums rose 33% from 2013 to 2018, then leveled off for a bit. Insurers cut rates when COVID-19 first reached the U.S. in 2020 and much of the country went into lockdown, but premiums hit new highs again in early 2022, and ever since the pace of their rise has steadily accelerated.

Key Insights

Nearly three-fourths of Americans (72%) say car insurance is becoming unaffordable for the average person or family.

More than half of Americans say car insurance caused them moderate (40%), high (11%) or extreme (3%) levels of financial stress in the past year. Only 14% said it caused them no stress at all.

About half of Americans (48%) say their auto insurance got more expensive last year, despite filing no claims, receiving no moving violations and adding no additional vehicles or drivers to their policies.

In the past year, half of Americans cut spending in other areas due to the cost of car insurance, with a third cutting back on restaurant meals and entertainment and a quarter spending less on family vacations and clothing. A quarter said they delayed a big purchase, such as a large home appliance or car.

To cut their monthly insurance payments, 23% settled for less coverage in the past 12 months, with 60% of them (14% of Americans, overall) settling for less coverage than they thought they might need. One in 5 said they chose a higher deductible in the past 12 months.

One in 5 Americans think they don’t have enough coverage to protect themselves and their family’s financial future if they are in a serious accident that requires hospitalization for one or more people.

Cutting Back

As car insurance soars, even people in higher income brackets are being forced to find ways to compensate by reducing expenses in other areas. More than 1 in 5 respondents with an annual household income higher than $129,000 said they cut spending on entertainment in the past 12 months, and a quarter said they spent less on restaurant meals, because of auto insurance premiums. That compares with 33% of all respondents who said the same regarding both categories of spending.

High insurance costs are also making drivers reluctant to trade up on their existing vehicle, for fear that a newer vehicle will be more expensive to insure. More than half of respondents (56%) say the fear of higher premiums has made them more likely to keep their older car for a longer time.

Trading Down

People have also reacted to the rising cost of auto insurance by buying less of it, even if it means settling for less than they want or think they need. In the past year alone, 1 in 5 Americans have chosen to accept a higher deductible to lower their payments, including 20% of respondents with a household income above $129,000 a year.

Meanwhile, nearly a quarter (23%) have bought a lower level of coverage because of the cost. Of those people, 60% said they accepted less coverage than they thought they might need. It’s little surprise, then, that 21% of respondents said they don’t think their coverage will adequately protect their family’s financial future if they are involved in a serious accident that requires one or more people to be hospitalized.

Shopping Around

With premiums soaring, 43% of respondents said they shopped around for the best deal during the past 12 months. That’s up from 37% recorded in late 2022 in Jerry’s

2023 State of the American Driver

report.

Nearly 1 in 5 respondents (17%) said they switched insurance providers, and half of those who said they switched had switched at least once before within the past three years. That was true for only 19% of those who didn’t switch in the past 12 months—more than half of them haven’t switched in at least five years.

Only 19% of respondents said they have ever used an online price comparison tool such as the AllCar™ app Jerry. The numbers were higher for Millennials (24%) and Gen X (22%), and sharply lower for Baby Boomers (7.7%).

Many insurers offer possible discounts if customers agree to electronic monitoring of their driving. Only 19% of respondents said they currently allow such monitoring, with younger generations much more open to it. The figure was highest for Gen Z (29%), followed by Millennials (25%), Gen X (16%) and Boomers (10%).

Yet substantial numbers indicated a willingness to agree to electronic monitoring if it could lower their premiums. Overall, people were more open than not, and willingness was again higher among younger generations.

Conclusion

The cost of auto insurance is clearly a pain point for most Americans, and insurers see little relief in sight for the underlying causes that have driven the premium increases in recent years. In fact, many insurers have been struggling to turn a profit because of them. So it seems more likely than not that the pain for American consumers will only get worse. Still, a greater willingness to shop around and switch insurance providers, and to agree to electronic monitoring of their driving habits, could at least dull the pain somewhat.

Methodology

All survey data is based on a nationally representative survey of 1,210 respondents conducted in August 2023 using Pollfish. Respondents were filtered to include only those aged 16-77 who were fully responsible for paying for auto insurance on their vehicle or their family’s vehicle. More information about Pollfish and its audiences can be found on its

website

Data on the rising cost of car insurance was gathered from the

U.S. Bureau of Labor Statistics

Written By

Henry Hoenig · Data Journalist

Henry Hoenig previously worked as an economics editor for Bloomberg News and a senior news editor for The Wall Street Journal. His data journalism at Jerry has been featured in outlets including CBS News, Yahoo! Finance, FOX Business, Business Insider, Bankrate, The Motley Fool, AutoWeek, and Money.com.

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