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Insurance companies make money by collecting premiums and denying claims. Once you've proven to be a greater liability to insure than originally expected, your rates go up and typically stay there. This is also why insurance company commercials are so prevalent. The idea of saving money on premiums by switching insurance companies is the prevailing strategy of the accident-prone masses.

>Like prices for everything else in the world is going up right now so would that cause my insurance rate to increase?

Essentially this.

Risks are pooled in the insurance world. Your premium will rise or fall (lol) depending on the cost to pay claims associated with your pool. The frequency of accidents, break-ins, etc. in your market will determine how high the premium is, along with the cost of covering those events. When the costs associated with mechanical and body repair rise (as they have), the premium will rise as well.

Insurance companies are a "for profit" business. As their alleged costs to cover customer expenses go up, the rates we pay to be covered also go up. Just because you or someone you know hasn't had any claims, there are probably hundreds per day (or more) that do. With the costs of materials and labor going up, the have to charge us more to cover repairs and losses for all of their clients

That's the official/legal explanation anyway. In reality, it's more along the lines of we have to pay what they charge, or we're not allowed to drive. And since many, many of us need to drive in order to get by, they will charge what the market can bear

Think of the insurance company like a bank. They take the money from everybody's premiums and put it in one big pool of money. Their "bet" is that the number of accidents their customers have will cost less in claims than the big pool of money. That means they have money left over and can use that money to hire more people, advertise, invest, etc. They lose money if they're wrong, and peoples' claims exceed the amount of money they took in.

So one thing they do to make sure they win this gamble is they employ people who are very good at statistics and data analysis called "actuaries". These peoples' job is to look over as much data as possible and come up with what the "risk" of people who fit certain profiles are. That "risk" helps the insurance company figure out how much it should charge for premiums. Actuaries are creepy good at this stuff, but mostly because statistical analysis is creepy accurate when looking at data based on millions of people over decades.

But an individual's level of risk is not the ONLY thing that impacts this. The economy definitely matters.

When I was a kid, a fancy car cost about $30,000 and you could do pretty well for about $15k. Today, finding decent cars for less than $20k is hard "fancy" cars are easily $80k. Now think about that. When my parents bought an $8,000 used car, that's the value they were trying to insure. Now, the same kind of car costs about $24,000. That means if I total the car, the insurance company owes me 3x as much as it owed my parents! So it follows that I probably should have to pay more to insure it.

This is kind of happening across the board. I had a conversation with my agent last year and he complained about it. Even small things like windshield cracks are going through the roof, because now windshields incorporate features like sensors to automatically turn on wipers or need special areas to facilitate built-in cameras and traffic assist sensors that also may need recalibrating. My car's front bumper has an array of 8 parking assist sensors that cost $200 EACH to replace, not to mention the labor involved with recalibrating them. My parents' car? The bumper by itself probably cost less than one of those sensors. So now if I get in a small accident that damages the bumper, it might cause $2,000-$3,000 worth of "damage" to the car.

Risk did not go down, but the costs of each accident have gone up. So there's the same number of accidents, but they cost more per claim. That means the insurance company needs a bigger "pool" of money, and the only way to get it is to raise premiums.

This is also happening in other insurance fields because of inflation and other factors. A house that cost $90,000 10 years ago and costs $400,000 today will, naturally, command a higher insurance cost.

Healthcare's constantly going up. There's a giant pandemic we decided would be convenient to ignore. It's leading to catastrophic numbers of deaths, and that translates to life insurance claims. It's also leading to an extra few million people facing some form of disability, which means medical treatment, which means more insurance payouts. More and more people are getting diabetes, which requires them to get insulin, which is excessively priced and leads to higher claims. We also split our "pool" of healthcare in the US among hundreds of different insurance companies instead of having one big "pool": that means each individual company has to work harder to make sure its "pool" is big enough so they don't go out of business. It also means they have to be pickier about what treatments they approve, which sometimes means someone isn't given preventative treatment so they later develop a more expensive chronic condition. (The insurance company sort of gambles that they die or get fired and thus lose coverage instead.)

Then you have to figure it's all connected. If you get in an accident, it's never JUST the cost of the car. You might owe something to the other person if you caused the accident and that might be part of the claim. There might be healthcare costs on either side. Since all of those are ballooning without bound it costs more, which costs insurance more, which means they charge you more.

All of this is making the size of the "pool" needed by insurance companies bigger. The more expensive everything gets, the more expensive insurance gets. The good news is the more expensive everything gets, the more money the people so rich they don't need insurance make!

Insurance is risk protection. To use the example of a car, the risks including crashes, being stolen, and having a tree fall on it. You pay some money each month (your premium) and in return if one of the risks happens the company pays you. You are betting against yourself and the insurance company is taking the other side of that bet. Your rates going up is a sign that there is greater risk associated with you now. It could be additional cars, younger drivers with access to the car, or a history of accidents. Any of these things creates an additional likelihood of a risk happening, and the higher premium is a reflection of that greater risk.

Rates go up based on expected costs to cover... if parts and repair labor costs go up, so does insurance. If replacement vehicle costs in case of vehicle being totaled go up (and check out the insane increase in used car prices the past couple years), then insurance goes up. If natural disasters damage/destroy vehicles more often, insurance rates go up. If theft rates go up (looking at you, Kia and Hyundai), then rates go up. And then there is simple inflation... when it costs more to hire employees, to rent offices, pay for office supplies, etc. then costs go up.

Insurance broker here! The primary cause of auto insurance increases (especially in the US) over the past two decades has been skyrocketing healthcare costs - and this also affects business's liability and workers' comp insurances (which pass along to the consumer) as well as personal homeowners insurance, because that also includes liability.

The property damage of an accident is usually pretty limited - a few new parts, the occasional totaled car, but these are all costs with a reasonable limit. But healthcare costs rising means that the liability is increasing - even a minor accident with mild whiplash can wind up costing thousands of dollars in medical costs, and accidents with serious bodily injury will quickly add up or hit even hit the insurance limits.

Right now specifically, because of the state of the economy, aftershocks of the supply chain issues and worker shortages, the property damage is actually becoming a bigger factor. A lot of property insurance rates are going way up right now, for exactly that reason, and it's affecting the auto rates as well. But the economic factors like that are going to come and go - the constant for several decades now has been the factor that healthcare costs play on the liability side of your insurance; that's what's generating the majority of the premium that you're paying for auto coverage.

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For what it's worth, insurance companies actually are charging a "fair" price, in the sense that most years, the amount that they take in in premium and the amount they pay in claims work out to be nearly even. They're not doing that out of the goodness of their heart - they're doing it because it maximizes their market share; if they don't set those rates, another company will, and they'll be priced out. The profit margins on "additional" coverages like comprehensive and collision tend to be a bit higher, but on basic liability and property, they're actually aiming to break even, or as close as possible. That ensures the biggest market share from people who want to pay their cheap rate, without too much risk of losing more than they bring in.

They make their money primarily just on investing that premium while they have it, along with some added income from fees that they charge outside of normal premium. Really, the only type of insurance that usually doesn't follow that pattern is whole life - they actually nearly always pay out more in claims than they take in premium, but that's balanced out by the fact that they get to hold on to the money for so long, they make back a much better investment profit anyways.