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!