CarInsurance.com Insights
- The motor vehicle insurance index declined 0.4 percent in September, after being unchanged in August.
- The Consumer Price Index for All Urban Consumers (CPI-U) increased 3.0 percent over the last 12 months to an index level of 324.800 (1982-84=100). For the month, the index increased 0.3 percent prior to seasonal adjustment.
- Motor vehicle maintenance and repair costs were up more than 20 points year over year, from 405.1 in June 2024 to 427.3 in June 2025, and up to 442.8 in September 2025.
Inflation continues to affect the cost of car insurance. Inflation increases the cost of supplies and labor, which means insurers must pay out pricier claims.
The motor vehicle insurance index increased 7% year over year in June 2025, according to the U.S. Bureau of Labor Statistics.
“With inflation hitting an astounding (high), general cost increases have affected several components of car insurance from repairs to replacement costs, where insurance companies are paying out more to buy comparable cars when their customers’ cars are totaled,” says Loretta Worters, vice president of the Insurance Information Institute, or III, an insurance industry association.
Why are insurance costs so high in 2025?
Car insurance rates are high, in part, due to increased repair costs driven by sophisticated technology improvements in newer vehicles. Additionally, the rising frequency and severity of auto-related accidents contribute significantly to expensive insurance premiums.
In order to combat these costs, it is important for drivers to regularly review their car insurance policies and shop around for the best rates.
It is also essential to practice safe driving habits, such as obeying speed limits, avoiding distractions while behind the wheel, and maintaining a safe following distance.
In addition to these external factors, it is also crucial for drivers to maintain a clean driving record in order to keep their insurance rates low. This means avoiding accidents and traffic violations, as they can result in increased premiums or even policy cancellation.
Frequency and severity of auto accidents
The COVID-19 pandemic brought about major changes in our daily lives, including how people commute. With lockdowns and restrictions in place, there were significantly fewer cars on the road. However, this did not translate to safer roads as one might expect.
Despite fewer cars on the road, traffic fatalities rose during the pandemic due to riskier behavior, including increased speeding and reduced compliance with safety laws. The reduced traffic may have given a false sense of security, leading to more severe accidents.
See the trends over time for fatal police-reported motor vehicle traffic crashes in the table below.
| Year | Fatal police-reported motor vehicle traffic crashes |
| 2016 | 34,748 |
| 2017 | 34,560 |
| 2018 | 33,919 |
| 2019 | 33,487 |
| 2020 | 35,935 |
| 2021 | 39,785 |
| 2022 | 39,422 |
| 2023 | 37,654 |
Disaster-related claims
Natural disasters, from floods to wildfires, can wreak havoc on vehicles, often resulting in comprehensive insurance claims that drive up overall policy costs. Insurers adjust premiums accordingly, reflecting the increased risk and frequency of such catastrophic events.
These large-scale losses are already forcing insurers to reassess risk exposure, particularly in wildfire-prone regions. As a result, we can expect car insurance premiums and other vehicle-related coverages to rise over time — especially in areas exposed to wildfires, flood damage and other “severe weather” events.
“The challenge has also been difficult with premiums lagging behind the rate of inflation, while claims costs have increased,” Worters says.
Since insurers will need to build greater reserves to cover catastrophic payouts and buy more reinsurance (which costs more), these added costs trickle down to the customer via higher premiums, stricter underwriting, or reduced coverage offerings.
Increased auto repair costs
Motor vehicle maintenance and repair costs were up more than 20 points year over year, from 405.1 in June 2024 to 427.3 in June 2025, and up to 442.8 in September 2025, according to the U.S. Bureau of Labor Statistics.
“The introduction of new automotive technology improved safety — think crash avoidance sensors — and increased fuel efficiency, such as replacing steel with aluminum, have increased the cost of either repairing or replacing damaged vehicles,” Worters says.
What to do when car insurance rates go up
How to save on car insurance despite increasing costs
While you can’t control inflation or interest rates, you can shave off some dollars on your insurance premium.
“When looking at inflationary issues, you’re going to get hit from every direction – from buying a car, gas and the insurance for the car,” Worters says. “It’s a good idea when shopping for a vehicle to check with your insurer to see what the cost will be before you buy it.”
Here are other ways to save on car insurance:
- Think twice between leasing or financing a vehicle. You might also think twice before leasing a new car or taking out a loan on your new car: “You’ll need to pay for collision insurance as well as liability, which can significantly increase your premiums,” she says.
- Take a defensive driving course. Take a defensive driving course, which can shave anywhere from 5% to 20% off your car insurance, but this discount isn’t available in all states.
- Pay upfront or sign up for autopay. Other discounts include paying your premium upfront or signing up for autopay. Some insurers will bump down your premium by 3% to 5%.
- Drop coverage you don’t need. If you have a low-value vehicle that’s paid off, you can save money by dropping comprehensive and collision coverage.
- Bundle your insurance. You can also save by bundling your insurance, such as with homeowners, condo or renters insurance.
- Compare rates. Get quotes from several insurers to compare rates. This will ensure that you get the most affordable insurance.
- Maintain a clean driving record. You’ll save money if you don’t have to pay surcharges for accidents and tickets.
- Increase your deductible. This is a great option if you have plenty of savings to cover the deductible if you must make a claim.
- Sign up to have your driving monitored. Telematics is a great way to save money on your policy.
“Some motorists may see an increase in auto insurance rates due to a rise in accident frequency, accident severity and replacement parts inflation,” Worters says.
Frequently Asked Questions: Insurance and inflation
How does inflation affect car insurance rates?
Inflation raises the cost of auto parts, labor, medical care and vehicle replacements, all of which increase what insurers pay in claims. To offset these higher expenses, insurance companies raise premiums across most coverage types.
Why are car insurance premiums increasing so much?
Premiums are climbing due to record repair costs, higher claim frequency and more total vehicle losses. Supply chain disruptions and rising healthcare prices have also pushed insurer expenses to multi-year highs.
Will car insurance rates go down when inflation drops?
Possibly, but not right away. Insurers adjust rates based on long-term cost trends, so even if inflation slows, it can take months or years before premiums stabilize or decline.
How can I lower my car insurance costs during high inflation?
Shop around for quotes annually, bundle home and auto policies, consider higher deductibles and take advantage of discounts for safe driving or low mileage. Comparing rates can save hundreds per year even in a high-cost environment.
Which states are seeing the biggest inflation-related insurance hikes?
States with high repair and medical costs — including California, Florida and Colorado — have seen some of the steepest increases. Weather-related claims and population density also contribute to regional premium differences.
Does inflation affect all types of car insurance coverage equally?
No. Inflation impacts collision and comprehensive coverage the most because these cover repairs and replacement costs directly tied to auto parts and labor. Liability premiums tend to rise more gradually.
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Resources & Methodology
Sources
NHTSA. “Traffic Safety Facts Annual Report Tables.” Accessed October 2025.
S&P Global. “Largest US private auto insurers boost rates by double digits in 2023.” Accessed October 2025.
U.S. Bureau of Labor Statistics. “Consumer Price Index Summary.” Accessed October 2025.
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