Report reveals concerning reason drivers may see a drastic rise in insurance costs: 'It's gotten out of whack'

Homeowners insurance has skyrocketed in recent years because of extreme weather events, and a new report has revealed that car insurance rates will likely experience a similar spike, partly for the same reasons.

What's happening?

Data scientists from online insurance comparison marketplace Insurify have found that states prone to natural disasters will have some of the highest auto insurance premium hikes across the nation.

The company projected the average annual full-coverage car policy premium in the U.S. to peak at $2,469 by the end of 2024 — 22% higher than last year — accounting for factors like insurers' underwriting losses, thefts, accidents, and legislative changes.

However, Insurify expects Minnesota (61%), Missouri (55%), and Illinois (31%) to have some of the largest increases in car insurance prices after storms in those states, which produced hail the size of golf balls, last year. Meanwhile, coverage for drivers in North Carolina is projected to soar by 39% following the heavy rain, wind, and flooding produced by Hurricane Idalia.

Chase Gardner, a data insights manager at Insurify, said that insurance companies are struggling to make a profit with how much they have to pay out for claims.

"They try to keep that in a tight balance," he told the Pittsburgh Post-Gazette. "In the past couple of years, it's gotten out of whack. It's gotten pretty high. They are paying out way more."

Why are the rising car insurance rates concerning?

The rising prices reflect the increasing range, severity, and seasonality of extreme weather events fueled by an overheating planet. 

"I think climate risk will likely start to play a role in new areas. As we experience tornadoes, hail, and flooding in places where they weren't necessarily a major threat before, the increased frequency and severity of these events will need to be considered in pricing," Betsy Stella, vice president of carrier management and operations at Insurify, said in the report.

According to the National Oceanic and Atmospheric Administration, the annual average of $13.1 billion weather events during the 2010s jumped by 56% to 20.4 events from 2019 to 2023.

Insurify cited data from Swiss Re that found that severe thunderstorms accounted for 70% of insured natural catastrophe losses worth $34 billion in the first half of 2023. The company also sourced estimates from CCC Intelligent Solutions, which stated that individual claims filed for a single hailstorm's damages could average around $5,000 for a total of $130 million in auto losses.

Therefore, insurance premiums for home and auto will continue to soar or force companies to leave states entirely. Wildfires have residents of Washington, New Mexico, and California scrambling for alternatives after insurance companies dropped them or raised rates to unaffordable levels, while Florida's barrage of hurricanes has the state in an insurance crisis.

What's being done about the rising insurance rates?

The report mentioned the legislative actions in states with some of the most expensive full-coverage car insurance rates driven by weather-related damages. The South Carolina Supreme Court ruled last year that auto insurers have to cover damages for all vehicles registered to the policyholder and their family. 

Florida and Louisiana have taken a different approach, passing laws to lower rates by reducing the financial responsibility of insurers.

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