American car insurance rates are going up up up. In the past decade, they climbed 29.6 percent, to an average of $1,548 in 2019 from $1,194 in 2011. The surge, detailed in a new report from insurance shopping site The Zebra, outpaced both inflation (by far) and the increase in average car prices (more narrowly). And it came even as the rate of crashes has fallen year over year.
Aggrieved drivers have plenty of directions to point their fingers. Vehicle theft is on the rise, and extreme weather fueled by climate change can destroy swaths of vehicles in short order. Hurricane Harvey wrecked up to 1 million cars in the Houston area in 2017. And while crash rates have dropped, they’ve been buoyed by increasing urbanization and a strong economy, which put more drivers—many of them distracted by smartphones—in tighter spaces.
A more surprising, counterintuitive culprit isn’t the wider world or the person behind the wheel but the car itself. It turns out that new features designed to keep vehicles in their lanes and out of trouble are contributing to rising insurance rates.
That’s because the sensors that power those systems make cars much more expensive to fix when they do crash. Dent a steel bumper, and a few hammer blows gets you back on the road. Smash one on a new car, and it could mean replacing a radar, a camera, and ultrasonic sensors, then calibrating them so they work properly. Replacing a cracked windshield now comes with the extra cost of having someone readjust any cameras that look through the glass. “Technology is playing a bigger role than ever in pricing,” says Nicole Beck, The Zebra’s communications chief. “It’s not actually making it cheaper for people.”
While some studies have shown the effectiveness of emergency braking, insurance companies haven’t yet seen enough evidence to justify a break in rates for most of these features. That’s not to say lane keeping, parking assist, and the rest don’t work. They’re all relatively new, and the actuaries aren’t yet confident that their benefits outweigh the extra costs they incur to repair. Complicating the picture is the fact that each automaker offers its own version of each feature, and that drivers may not keep the systems engaged.
“A lot of the developments so far have mixed results,” says Tom Karol, general counsel for the National Association of Mutual Insurance Companies. “It’s not really been proven out yet, in terms of benefits.” Which is why, according to the report, drivers who go for electronic stability control, which keeps cars from spinning out of control, save just $8 a year. Those who pay for blind spot warning, driver alertness monitoring, lane departure warning, night vision, or parking assistance systems save nothing at all.
Still, at least one company sees the upside of sensor-driven driver assistance. “They absolutely lower the frequency of crashes,” says Alex Carges, the chief actuary at The Root, an insurance startup that determines rates based on how people drive, using accelerometer and GPS data from their phones.
The Zebra, which lets users compare insurance rates from various providers (as Kayak does for airfares), produces this report every year, analyzing data that insurance companies file with regulators in each state. Several industry experts say these findings track with their observations.
Active safety systems aren’t the only driver of higher insurance costs. Take the widespread shift away from traditional halogen, even in inexpensive cars like the Kia Forte. But break a Forte high-intensity discharge headlamp, the Insurance Institute for Highway Safety found in 2018, and your repair bill is nearly $1,800. Carbon fiber is increasingly popular because it’s lighter and stronger than steel or aluminum, but when damaged, it has to be replaced. “These newer cars are just much more complicated to repair,” says Jeff Briglia, the COO of insurance company Metromile, which sets its rates using a pay-per-mile model. The cost of crash repairs has risen about 5 to 6 percent each year since 2015. In the same span, the frequency of crashes has dropped by just about 2 to 3 percent. That gap, Briglia says, explains the steep rise in rates.
And why, with all the new safety features, haven’t the number of crashes fallen further? The answer may be found in the car insurance industry’s latest plague.
Distracted driving has become a major problem in the past decade, as the share of Americans who own a smartphone rose from 35 percent to 81 percent, and as automakers raced to offer more capable infotainment systems that run on ever-bigger screens. One study by the startup Nauto, which puts cameras in fleet vehicles so owners can track their drivers’ behavior, estimated that in a four-month stretch, more than two-thirds of the crashes it looked at were caused by distracted drivers. Inattention behind the wheel has been blamed for recent rises in traffic fatalities among pedestrians.
So in the past few years, insurance companies have responded by jacking up costs for anybody ticketed for using their phone while driving. Since 2015, rates for those drivers have spiked by as much as 23 percent year-over-year.
The good news for car owners is that the steep upward trend in rates may not last. More data showing the upsides of driver assistance tech may accrue. Repairs should get cheaper as more mechanics learn to replace and calibrate sensors and as the prices of those parts drop. The mystery lies in figuring out how long those trends will take to make their effects felt. “Knowing that it’ll happen eventually is pretty easy,” Carges says. “Knowing exactly when the inflection point is, is not.”
The high cost of repairing sensor-packed vehicles outpaces the savings from fewer crashes.