Auto insurance rates in the US have increased by 42% over the past 2 years

Skyrocketing auto insurance costs contributed to a faster-than-expected rise in inflation in March, adding to the increasing expenses for U.S. vehicle owners.

On a monthly basis, car insurance prices, as measured by the consumer price index (CPI), rose by an unadjusted 2.7%, with a year-over-year increase of 22.2%, according to data released Wednesday. The CPI is a key inflation gauge and a broad measure of the cost of goods and services across the economy.

Auto insurance costs have been rising consistently since December 2021. Since then, they have increased by 45.8%, according to the U.S. Bureau of Labor Statistics. However, auto insurance remains a small portion of the CPI, with a 2.85% weighting.

This increase adds to the historically high prices for new and used vehicles since the coronavirus pandemic. It has also become more expensive to repair vehicles due to supply chain shortages, mechanic wage increases, and additional technologies in vehicles, such as microprocessors, cameras, and sensors, all contributing to higher vehicle and insurance costs.

“There’s not a single factor, but the biggest factor is a combination of new cars being more expensive, so if you total your car, the replacement cost is really high, and a fender bender is very expensive right now,” said Sean Tucker, senior editor at vehicle valuation and automotive research company Kelley Blue Book. “The technology in the cars is a very specific problem.”

Instead of replacing a plastic or steel bumper, a simple fender bender can now damage cameras, proximity sensors, and other technologies used for newer safety features like cruise control, parking, and emergency braking.

“Premiums have been on the rise because the cost of what goes into auto insurance has been rising,” David Sampson, CEO and president of the American Property Casualty Insurance Association, told CNBC. “There’s a long lag time between when the trends emerge and companies see these loss trends existing. It then takes time for them to build that into their rate application filings.”

Earlier this year, Sampson had slight damage to a bumper on a 2024 pickup truck on his property, which was quoted to cost him $1,800 to repair or replace.

“All of the technology that we’ve come to rely on makes the replacement or repair of these vehicles really, really costly,” said Sampson, whose organization is the primary national trade association for home, auto, and business insurers.