Gas station prices have been one of the inflationary challenges that have hit consumers’ pockets in recent years. Vehicle insurance costs were another.
But even as government data points to some recent decline in inflation across gas prices and other goods and services, those insurance bills are still trending in the wrong direction, according to Eric Poe of Cure Auto Insurance.
He said: “The cost of insurance increased by 37% in the period from 2021 to 2022.” “That has not eased in 2023.”
The cost of auto insurance rose about 20% throughout most of 2023, according to the U.S. Bureau of Labor Statistics’ Consumer Price Index report for the fall.
The bad news gets worse, Poe said. Car insurance is actually higher in New Jersey than most states. According to an analysis by financial education site MoneyGeek, car insurance in New Jersey costs an average of $124 per month. The going rate nationwide is about $85.
Poe attributes this in part to recently introduced state laws, such as increasing the minimum liability coverage required for auto insurance policyholders starting in 2023.
There were also what Poe believed were “lawyer-friendly” laws added to the books, including a way for first-time policyholders to sue their insurer for not settling claims within a time period deemed reasonable.
At the same time, the supply chain slowdown in the automobile manufacturing sector has led to everyone being asked to find replacement auto parts for affected vehicles, Bo said. There was a massive shortage, and insurance premiums were paid for the limited supply of parts that could be found.
One aspect that has been overlooked, Poe noted, is that cars today are manufactured using technology that makes them much more expensive to repair. A simple bumper replacement might have cost $30 a decade ago. Today, it may have built-in sensors, making its price closer to $300.
“I’ve been to conferences where they were showing airbag technology on the front hood of a car, with the idea that if you hit a pedestrian, the crash wouldn’t be as bad,” he said. “That could save a few lives, but it’s also going to cost billions when these things are deployed — if you think about how often cars have a frontal impact that can trigger these maybe $4,000 airbags to deploy. And that’s going to trickle down to the carriers. Insurance documents.”
Even with current technology, Poe sees no end in sight to escalating vehicle repair costs, which greatly impact the amount insurance companies charge customers.
“With this perfect storm fueling an increase in the cost of basic insurance in New Jersey and across the country, national carriers have lost billions (of dollars),” he said. “You have companies like GEICO, the state’s largest policy writer, applying for a 26% rate increase now.
“So, what you’re brewing is basically a quasi-crisis for the affordability of auto insurance in the state of New Jersey.”
Not all Jerseyans will feel this crisis to the same extent. And since Poe has consistently criticized his industry himself, the rates are dramatically worse for underrepresented and disadvantaged communities.
The Garden State remains among the states that allow auto insurance companies to use a person’s credit score in determining how much to pay. MoneyGeek’s analysis indicated that average car insurance costs in New Jersey are $90.25 for those with “excellent” credit scores and an average of $212.58 for those with “poor” credit scores.
Poe thought about it, but ultimately declined to join the near-unanimous majority of companies that use credit scores to set rates at the nonprofit CURE Auto Insurance, where he is chief operating officer.
It is this refusal to embrace these practices that he credits with increasing his business by 30% in 2023.
But when it comes to helping Jerseyans overcome life’s challenges, he still prefers — especially with soaring auto insurance rates — not to let any insurance company use it.
“It is sad that we cannot protect those who, for one reason or another, do not have good credit,” he said. “We are kicking third income earners when their income is already low.”