Insurance Inflation Index: Car insurance rates drop

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Auto insurance prices declined 0.8% in March, according to the April 10 U.S. Bureau of Labor Statistics’ Consumer Price Index, a significant reversal of the month-over-month increases seen since last fall. 

Year-over-year car insurance rates rose 7.5%. While that’s still higher than the overall rate of inflation, it’s down from 11.1% in February, according to the BLS. 

March’s  inflation number continued the trend seen at the end of last year. January’s report showed an 11.8% year-over-year increase, following a rise of 11.3% in December, 12.7% in November, and 14% in October. 

The recent easing is welcome news to consumers, who, in the last two years, have seen auto insurance prices jump more than 30%%, according to BLS’s tracking of urban consumers’ spending.

“The CPI report is in line with what Triple-I had forecast for 2025. Average rate decreases are moderating because premium increases over the past two years are catching up with insurer loss costs,” said Mark Friedlander, senior director, media relations, at the Insurance Information Institute (Triple-I), an industry trade group.  Triple-I had forecasted a countrywide average personal auto rate increase of 7% in 2025.

“Further, several major national insurers have been filing for rate decreases, particularly State Farm, Progressive and Geico in Florida,” Friedlander said.  “These reductions are due to a 500% year-over-year decline in auto glass claim lawsuits following tort reform passed by the Florida Legislature in 2023.”

The auto insurance wildcard going forward is President Trump’s tariffs. 

The president announced sweeping tariffs at the beginning of the month, many of which he paused for 90 days on April 9. However, 25% tariffs on imported cars remain in effect and a 25% tariff on imported auto parts is still scheduled to take effect in early May. The levies on car parts would increase prices for those products, which in turn would hike the cost of repairs. Insurers would most likely increase their rates to cover the higher costs. 

“The situation regarding tariffs continues to fluctuate,” Friedlander said. “However, as China is a major supplier of auto parts in the U.S., current tariffs are expected to have a negative impact on replacement costs for vehicles. Most likely, rate impacts would not occur until 2026. Further, current policies in force would not be impacted as rates are locked in for six-month and 12-month terms.”

While tariffs aren’t likely to affect the rates consumers see in the near future, it’s not clear what happens long-term.

“A crucial question remains: Will the trend towards moderation be sustained?” said Scott Shapiro, U.S. insurance sector leader at KPMG, the audit, tax and advisory firm. “The uncertain landscape of tariffs is raising concerns about cost trends. After navigating supply chain disruptions from the pandemic, insurance companies must now figure out how to predict future costs in light of uncharted tariff policies.” 

Consumers looking for cheaper rates

Still, consumers — stirred by rising premiums over the last couple of years — are increasingly looking for cheaper rates, according to LexisNexis Risk Solutions. The data and analytics company said on Feb. 18  that as of Dec. 31, 2024, almost half (45%) of all policyholders shopped at least once in the last 12 months for a new policy.

As consumers seek out cheaper insurance, it’s important to note that individual rates depend on many factors, including a person’s age, driving history, the car they drive, their coverage levels and where they live. For instance, average car insurance prices can range from $1,175 a year in Maine to $2,883 a year in Louisiana, according to the most recent analysis by Insure.com.

In other insurance segments:

• Health insurance prices rose 0.4% in March. This followed a 0.3% month-over-month February. Prices were up 0.7% in January. 
• Prices for tenants’ and household insurance — which most people call renters insurance — were down 0.3% from February to March. Prices had been easing the last few months. Rates increased 0.8% from January to February and were up 1.1% month-over-month from December to January.

The BLS doesn’t track homeowners and life insurance. 

For March, the overall Consumer Price Index, a measure of the cost of U.S. goods and services, decreased 0.1 %. This followed a 0.2% increase in February, a 0.5% increase in January, and a 0.4% increase the month before. 

The index is up 2.4% for the last 12 months, lower than expected.

John McCormick

 

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John McCormick is an insurance expert and the editorial director for QuinStreet's insurance sites -- CarInsurance.com, Insurance.com and Insure.com. Before joining QuinStreet, he was a deputy editor at The Wall Street Journal and was an editor and reporter at several media outlets where he covered insurance, personal finance and technology.