Setting the Record Straight: Auto Insurance Cost Increases Explained

WASHINGTON, D.C. - The American Property Casualty Insurance Association (APCIA) today released the following statement attributed to David A. Sampson, president & CEO at APCIA, regarding the factors impacting the rising cost of auto insurance.

"In the heated arena of presidential campaigns, candidates often seize on popular issues to connect with voters, and auto insurance has recently become one of them. However, the political rhetoric surrounding the property casualty industry has often led to confusion and misrepresentations. It's important to set the record straight: the auto insurance marketplace is a complex, competitive, and highly regulated system that balances risk, coverage, and consumer protection. Understanding the factors impacting auto insurance rates can help cut through the noise and focus on meaningful ways to reduce costs for consumers.

"Across the country, auto insurance premiums have been on the rise for the simple reason that the cost of what goes into auto insurance has been rising. This includes the cost of auto parts, labor, rentals, and replacement cars. Overall, the severity of traffic accidents has spiked, leading to more expensive medical claims. To put all of this into perspective, auto insurance claims and expenses spiked to more than $1.12 for every $1 in premium in 2022.

"Therefore, auto insurance rates have increased in 2024, even as inflation has started to slow. Insurance policies typically renew on a six- or 12-month basis, so it takes time for insurance rates to catch up with these more expensive inputs. Over the last five years (July 2019 to July 2024), the cost of vehicle repairs increased by 20.9 percent, the cost of repair parts increased by 24.1 percent, and used car values increased by 25.8 percent. Vehicle thefts in the U.S. have also surpassed more than one million for the second year in a row. Simply put - insurance prices lag inflation.

"Furthermore, the abuse of the legal system has impacted the affordability and availability of insurance in states and across the country. For example, there has been a 319% increase in personal injury awards over the last decade.

"In order for insurers to provide the coverage that Americans rely on to pay claims, premiums must keep pace with rising losses. State regulators play a critical role in the health of state insurance marketplaces by monitoring solvency and market conduct, which should be the twin pillars of state regulation. Unfortunately, outdated regulatory systems have provided additional roadblocks to restoring the insurance marketplaces. In some states, insurers are facing increasing difficulty in managing risk due to government mandates and regulatory interference.

"Moving forward, insurers are urging drivers to reduce their risk by avoiding driving behaviors like distracted driving, speeding, and impaired driving that may result in a crash. Insurers are also advocating for better infrastructure, including reliable supply chains for critical auto parts and safer roads. New technologies, such as telematics, can also be helpful tools for controlling costs and increasing motorist safety."