Average Auto Insurance up 18%... Florida Auto Insurance up 88%!

This alarming increase in auto insurance premiums has occurred over the past two years, according to the Federal Bureau of Labor Statistics. The purported reasons are more crashes, increased litigation, and higher repair costs.

In my opinion, there’s another very significant but unobvious reason. That is consumer inflation psychology. When prices go up unexpectedly, buyers complain and may even buy from a different store, switch brands, or go temporarily without. However, when all prices for a given product or service continue to rise, buyers learn to expect it and reluctantly accept the fact. When sellers learn that their buyers are acting as if high prices are the norm but don’t complain or consider switching sellers or choosing a different brand, sellers increase prices even more than their increased costs have justified previously.

This happened in the new and used car markets. The Covid shortages and supply chain interruptions caused production and sales to plummet, but because of the inflation psychology of car buyers, car dealers were able to raise their prices so high that, in spite of their car sales being way down, their profit per car was so high they did and are making far more profits today than they did when they sold far more cars. The same thing happened with the car manufacturers because they raised their prices to the car dealers so high as to offset the decline in production.

Now the auto insurance companies are benefiting from buyer inflation psychology. Don’t let this happen to you, and here are some tips to help you:

• Shop your insurance premium with several other insurance companies. Remember, insurance companies are a lot like car dealers; they charge each customer as much as they can get away with. Your insurance company has been increasing your premium every year, and now they’re increasing it at a greatly increased amount. Another insurance company will offer you a lower premium with the hope that they can increase your premium in subsequent years because most people stay with the same insurance company for too many years. You can also hire an independent insurance agent who can do the premium shopping for you.

• Raise your deductible as high as you can and/or drop your collision/comprehensive insurance. The average driver files a claim only once every twenty years. Imagine how much you can bank/invest that saved deductible cost instead of your insurance company doing the same with your extra deductible and collision/comprehensive premium.

• You may be able to bundle your homeowners with your auto insurance.

• Take a defensive driving course or allow driving to be monitored, and some insurance companies will discount your premium.

• Buy a copy of the October Consumer Reports that, frankly, I got a lot of the above information from. You can access it online at www.CR.org.