Posted July 22, 2024 • 5 min read
Auto insurance premiums have been rising at historic rates, leading to an increase in the number of drivers who are unwilling—or unable—to insure their vehicles. Others are scaling back their coverage to bare minimum amounts to keep up with skyrocketing costs.
Texas is one of the most expensive states for car insurance. An estimated 12 – 20 percent of Texas drivers are uninsured.
A combination of soaring premiums, reduced coverage, and an uptick in the number of serious crashes is causing a perfect storm in the auto accident liability system. With more uninsured and underinsured motorists on the road, you should review your plan and talk to a car accident lawyer if you’ve been in a crash.
No Relief in Sight for Surging Auto Insurance Rates
The years since the pandemic have been marked by high inflation, and car insurance ranks near the top of things Americans are spending more on.
Auto insurance premiums increased an average of 11.4% in 2022, 14% in 2023, and continue to rise in 2024. From February 2023 to February 2024, auto insurance rates increased almost 21%—a rate jump not seen since 1976.
Car insurance costs in June 2024 were up a whopping 19.5% year-over-year, according to CNBC, citing the latest Consumer Price Index data. The cost of auto insurance has been going up every month since December 2021 and increased 45.8% during that period.
J.D. Power reports that U.S. auto insurance rates have risen an average of 11.2% in the past 12 months and “do not appear to be leveling off anytime soon.”
The average cost of car insurance nationwide in July 2024 is $2,278/year for full coverage, says Bankrate. Insurify puts that figure at $2,160. While not an official industry term, “full coverage” generally means a policy that includes liability, comprehensive, and collision coverage.
Bankrate estimates that the cost of an annual full coverage policy in Texas is $2,404/year; Insurify’s estimate for full coverage in Texas is $3,003/year. Twelve months ago, that same policy would have cost Texans $2,082/year, says Insurify, which ranks Texas as the eleventh most expensive state for car insurance. A minimum liability-only policy costs Texans on average $700 – $1,400/year.
Experts blame costlier car insurance on factors that include higher vehicle and vehicle repair costs, rising healthcare and medical costs, more expensive losses from extreme weather events like hurricanes and floods, a surge in vehicle thefts and auto accidents, and more wrecks at higher rates of speed that have resulted in additional litigated claims.
Reduced police enforcement is another issue that might be contributing to more expensive auto insurance. DUI arrests are down nationwide even though the number of drunk driving deaths are up. From January 2020 to January 2023, traffic violation citations fell roughly 60%.
Short-staffed police departments could explain the drop in enforcement. The number of speeding tickets issued on Central Expressway in Dallas, for example, fell 30% between 2019 and 2021, even as fatal crashes were up across the city. Dallas has just 29 officers responsible for traffic enforcement in a city of 1.3 million people.
Rising Rates Affecting Rate of Uninsured, Underinsured Drivers
At a time of higher prices, Americans are looking to save money however they can. For some, this means scaling back on their auto insurance coverage or dropping coverage entirely.
Data from J.D. Power reveals that the number of American households foregoing auto insurance went up from 5.3% in the second half of 2022 to 5.7% in the first half of 2023. And more drivers say they are considering dropping their auto insurance or lowering their coverage limits in search of price relief.
- 1 in 4 drivers told autoinsurance.com that they are concerned about being able to afford car insurance premiums. 1 in 10 are reducing coverage or only carrying the state minimum limits to lower costs.
- The number of drivers interested in buying more than state-minimum car insurance limits is down 51% and the number of drivers lowering their coverage limits is up 12.31%, Insurify data shows.
- Nearly half of 18 to 24 year old drivers say in the past year they’ve thought about driving without car insurance and 17% have actually dropped coverage, according to Policy Genius.
- A survey from Assurance IQ found that 20% of respondents are considering dropping auto insurance.
Certain regions have historically had a much higher concentration of uninsured drivers. About 14% of all drivers nationwide were uninsured in 2022. But in the first half of 2023, a dozen states saw a 30% or more increase in the percentage of uninsured drivers compared to the previous year, reports J.D. Power. Two states—South Dakota and New Hampshire—saw their uninsured driver rates increase 10% and 84%, respectively.
- The Texas Department of Insurance (TDI) states that more than 2.6 million registered vehicles (12%) are not matched to an insurance policy.
- TexasSure, a program designed to reduce the number of uninsured drivers, estimates that as many as 1 in 5 Texas drivers are uninsured.
Uninsured rates vary by county, from 14.28% in Dallas County to 13.62% in Bexar County to 8.35% in Houston County. The highest uninsured rate is in Kenedy County (35.68%) and the lowest is in Aransas County (5.94%).
Even if a driver has insurance, carrying only minimum amounts could mean that they don’t have enough insurance to fully pay for the injuries and property damage they cause in an accident.
TDI recommends carrying uninsured/underinsured motorist coverage to protect against drivers with little or no insurance. But making an uninsured/underinsured claim could cause the insured’s rates to go up.
A higher uninsured driver rate can raise costs for insured drivers. The Texas Department of Motor Vehicles notes that insured drivers “pay almost $900 million a year to protect themselves against those with no coverage.”
America Headed For a Car Insurance Crisis
With insurance costs expected to keep rising, we are headed toward a “car insurance crisis,” experts told Newsweek.
Newsweek spoke with a Texas resident who called insurance cost hikes in the state “outrageous.” Her family is currently paying $14,290 per year to insure four vehicles. Although they can afford the price tag, she sympathizes with families forced to choose between their monthly budget and peace of mind on the road.
Dropping or reducing insurance may save money in the short-term, but it could exacerbate the insurance affordability crisis in the long-term.
When more Americans opt out of auto insurance, those who are insured end up paying more for coverage. Insurance companies also must pay out money for claims involving uninsured drivers. They then raise premiums to cover their costs.
Despite sky high insurance rates, insurance companies claim to be losing money. The industry reportedly lost $4 billion in 2021, $33 billion in 2022, and $17 billion in 2023. However, there is evidence that suggests the industry is coordinating rate increases to make up for losses in previous years.
Higher insurance prices and more price hike-related opt-outs, coupled with ongoing inflation and rising costs associated with insurance claims, are producing a potentially disastrous domino effect on the auto insurance system.
People could start driving less and move to a pay-per-mile policy or in some cases stop driving entirely and switch to car sharing or public transport. New insurance models may have to be invented, especially as more autonomous vehicles take to the road.
Uninsured drivers have negative effects on the overall economy as well because they rely on public resources for medical costs that taxpayers often end up paying for.
The Buck Stops Here For Car Accidents
Carrying uninsured/underinsured motorist coverage is not a fail-safe solution to the problem of more drivers going without insurance. Under Texas insurance law, you might have to sue your insurance company before you can obtain UM/UIM benefits. If you were hurt in a crash with a driver who can’t pay you what you’re owed, our uninsured motorist accident lawyers can help. We handle these cases on a contingency-fee basis and offer free case reviews.
