Behind the rise of auto insurance premiums

Personal auto insurance costs are now nearly 20% higher on average than a decade ago. In 2025, personal auto insurance rates rose by 1.1% nationwide, though this masks significant regional variations and higher-risk segments. While there are many reasons behind these increases, some of the biggest factors include new and used car prices, higher vehicle reparation costs, and the growing impact of severe weather.

Additional factors include higher frequency and severity associated with accidents and more comprehensive claims surrounding theft and vandalism.

Finding the root cause of these increases is not as easy as it used to be. For instance, if one company experienced a significant increase, we could look at other companies to compare the difference. However, in today’s market, the impacts are felt by every insurance carrier.

Higher car prices

The cost of cars has been steadily increasing; new and used car prices have gone up as much as 10-20% in recent months. As vehicle values continue to rise, insurers must pay more to help replace their customers’ totaled cars and trucks, which increases the cost of auto insurance premiums.

Skyrocketing prices can also be attributed to a rise in electric vehicles. As EVs grow in popularity, we have noticed increased claim costs due to higher purchase prices and difficulty obtaining parts. As one can probably discern, there is no single circumstance that increased premiums can be traced back to.

Higher cost of car replacement parts

Increased demand for transportation services, escalating costs of raw materials, and the complexity of replacing sophisticated vehicle components drive replacement part costs. These costs add to the expense of repairing a damaged car, pushing insurance settlements upward.

Modern cars are equipped with more sophisticated technologies and systems than ever before, and the cost of replacing such high-tech components has added further financial strain to the repair process. As repair costs continue to increase, the amount insurers pay to fix their customers’ vehicles also goes up.

The shift toward electric vehicles has introduced additional complexity. When EVs are damaged, they often require specialized parts and technicians. More significantly, battery damage from flooding or collisions can result in total-loss determinations even for vehicles with relatively minor damage. After Hurricane Helene in 2024, Florida experienced multiple EV fires linked to saltwater damage to lithium-ion batteries, underscoring the heightened risk profile of these vehicles.

Rise in car crashes and fatalities

There has been a significant increase in claims due to increased traffic accidents, injuries, and fatalities. More claims translate into greater losses for insurance carriers. Furthermore, as the frequency and severity of traffic accidents multiply, so does the involvement of attorneys and potential for substantial jury awards.

Rising comprehensive claims

Comprehensive claims remain elevated and are increasingly driven by severe weather events. Comprehensive insurance covers losses from disasters like hurricanes, hailstorms, break-ins, vandalism, and theft. Extreme weather has become the dominant factor: severe convective storms alone have averaged $38.5 billion in annual damage over the past five years, significantly impacting claims volumes.

Theft and vandalism persist, though at more stable levels than in recent years. The combination of these factors continues to push comprehensive claim costs upward for insurers.

Will your car insurance premium go up?

You may be wondering what all of this means for your car insurance premium. The picture varies significantly by region. While auto insurance rates rose by only 1.1% nationwide in 2025, states most vulnerable to severe weather and claims activity experienced notably higher increases. In 2025, New York saw rate increases of 9.3% and California experienced increases of 15.5%, well above the national average. High-net-worth individuals faced higher rate increases of 4.8% in 2025, reflecting their exposure to higher-value vehicles and greater liability risk. More rural states such as Vermont, Idaho, Maine, North Carolina, and Ohio continue to enjoy lower rates nationally.

We’re here for you

The good news is, The Horton Group has your back. Our personal insurance team will continue to work for you and try to make suggestions that will provide value for your family. While there may be a lot of uncertainty surrounding the current economic climate, you can be sure that we will be here for you every step of the way.