US Car Insurance Premiums Could Rise 4 Percent or More by 2025-End

U.S. tariffs on auto parts could impact insurance rates as companies are unwilling to bear the cost increases.

Cars on a highway in the Queens borough of New York City on March 23, 2025. Samira Bouaou/The Epoch Times

Car insurance rates in the United States could rise by 4 to 7 percent this year, with tariffs potentially playing a role, online platform Insurify said in an Aug. 5 report.

Although rates were steady nationally and decreased in 27 states during the first half of 2025, tariffs and inflation could derail that trend, the company said.

“Some insurers may have already accounted for tariffs when setting rates, while others may have to raise rates if tariffs increase the cost of claims,” the report stated.

Prices of car components may also be impacted by import tariffs.

“Insurify projects the national average cost of full-coverage car insurance will increase 4 percent by year’s end ($2,402), and up to 7 percent if prolonged tariffs lead to significant insurer losses ($2,472),” the report states.

The Trump administration had instituted 25 percent tariffs on vehicle imports in April while exempting overlapping duties from being charged on the same vehicle.

In May, a 25 percent tariff on auto part imports took effect. Parts meeting the U.S.-Mexico-Canada Agreement requirements were exempted to preserve the stability of the North American supply chain.

The administration has recently lowered tariff rates as part of new trade deals. For instance, in its deal with Japan, the United States lowered tariffs on Japanese automobiles from 25 to 15 percent.

In the trade deal with the European Union, Washington agreed to tariff automobile imports at 15 percent, down from the 30 percent that would have been applied without the deal.

If the tariff policies continue to soften, there is a lower likelihood that insurers would raise insurance rates, Insurify said.

As the Trump administration makes more deals with U.S. trade partners, it could mitigate the risk of an extreme surge in auto premiums this year.

Meanwhile, insurers are obligated to demonstrate that tariffs are driving up their costs before state regulators green-light rate hikes, the report said. As such, they cannot wilfully raise premiums without a solid rationale.

Certain insurance companies have insisted on rate increases.

During a May 1 earnings call, Tom Wilson, CEO of insurance company Allstate, said his company’s costs are “likely to be higher” due to federal tariff policies, particularly costs concerning auto replacement and repair.

“If we need to raise prices, we will raise prices just like we did in the pandemic because without margins, we don’t have a lot of room to absorb” the costs, he said.

Insurify expects Maryland to be the most expensive state in the United States for car insurance this year, with the annual cost projected to be $4,235 to $4,358, depending on tariffs. New York, the District of Columbia, Delaware, and South Carolina are expected to round up the top five.

New Hampshire is forecast to be the cheapest, with costs at $1,009 to $1,038, preceded by Wyoming, North Dakota, North Carolina, and Maine.

As for the yearly trend in premiums, rate increases softened last year, with insurers seeing improved profitability, data analytics company LexisNexis Risk Solution said in a June 12 statement.

In 2023, auto premiums had risen by 15 percent on an annual basis, which dropped to a 10 percent jump in 2024 as market conditions softened, the statement said.

“The combination of the market softening and a return to profitability presents a potential new chapter for the industry as insurers encounter a consumer base that is more willing than ever to shop for deals,” Jeff Batiste, a general manager at LexisNexis, said.

“However, this is the market as we understand it now, and we might be seeing a different picture in a couple of months. Insurers who can quickly evaluate shifting trends and adapt pricing models should have a competitive advantage, enabling them to price risk more accurately and quickly.”