Average car insurance premiums have been steadily rising since 2010. According to the Insurance Information Institute, the year-to-year rise in average premiums nationwide was 2.2 percent in 2012, 3.2 percent in 2013 and 3.3 percent in 2014, the most recent year statistics are available. Aren’t new cars safer today? Why is this happening?
More Miles, More Wrecks
We can blame some of the advancing insurance costs on the fact that people are driving more miles today, thanks in part to low gasoline prices. The more miles driven translates into more crashes, and more crashes mean higher average insurance premiums. The most recent numbers are from 2015. According to the Insurance Institute for Highway Safety (IIHS), Americans drove a total of about 3.1 million miles in 2015, resulting in almost 36,000 crash-related fatalities. That’s up from fewer than 2,969,506 miles driven in 2010, resulting in 33,000 fatalities.
Fatalities don’t tell the entire story, because most crashes don’t involve a fatality; but the simple fact that fatalities are up puts pressure on average insurance premiums.
More Car, More Insurance
News flash: Cars are more expensive than ever. By the National Automotive Dealers Association’s (NADA) calculations, the average price of a new car crested the $34,000 mark last year. Again, some of this can be blamed on low gas prices fueling truck sales at the expense of more affordable 4-cylinder cars. Although this number dropped for a couple of years during the recent recession and during other random years, the long-term trend has been upward. The more a car costs, the more it usually costs to insure and fix.
More Safety Tech, More to Fix
Here’s the dirty little secret about all those safety/driver-assist systems on many new cars today: They cost a lot to fix. Sensors and cameras are required to gather the data that feeds most of the high-tech semi-autonomous systems on new cars. Typically, they’re located in the most vulnerable of places, like bumpers and grilles. At some point, when most of the cars on the road have such systems and communicate with one another, the 90 percent of accidents attributed to human failure will evaporate. That’s when driver-assistance technology will bring down insurance premiums.
In the meantime, though, such systems are driving up repair costs, sometimes doubling or tripling what it would cost to fix a car without that technology. Insurance providers are factoring in these growing costs when calculating car insurance premiums for basically every driver.
Is the Tech Worth It?
At this point, the answer to the worth-it question is both yes and maybe. According to the IIHS, electronic stability control and front-crash prevention (FCP) are proven effective in reducing accidents. FCP systems with automatic braking, for example, reduce rear-end crashes by 40 percent. Those with just forward-collision warning cut them by 23 percent. With rear-end crashes representing roughly 13 percent of all reported collisions, an automatic-braking FCP would have reduced rear-end crashes in 2013 by 700,000.
The jury is still out on some other driver-assistance systems, such as lane-keep assist. IIHS found that most accidents resulting from a car drifting from its lane involve a driver who is sleeping, sick or drunk. In such cases, the car nudging itself back into its lane may not be sufficient to prevent an accident.
What it means to you: Technology costs money to buy and to fix. And we haven’t even brought up the topic of the costs of insuring against hacking. Even if you’re driving an older beater and only pay for liability insurance, the cost of your premiums reflect the added costs of fixing driver-assist systems on vehicles you might crash into.