Car Insurance Premiums Have Soared: What Is Behind the Spike?

More expensive repairs and an increase in risky driving behavior are some of the factors driving up car insurance rates.

Car insurance is a necessary expense for drivers, but premiums are getting pricey. Factors that contribute to the rising cost of car insurance policies include increasingly expensive repairs, risky driving trends, and litigation.

Key Takeaways

• Car insurance premiums are expected to rise 7.5% in 2025, a continuation of an upward trend seen over the past several years.
• Inflation, risky driving, and litigation are factors driving up the price of auto insurance premiums.
• You can potentially save on car insurance by shopping for better rates every year.

How Much Have Rates Increased?

The price of car insurance increased 12.7% over the last year, according to November 2024 Consumer Price Index (CPI) data. The average annual cost of car insurance in 2025 is expected to be $2,101.

What Is Behind the Rise?

• Expensive car repairs: The parts required to repair newer cars with all of their safety equipment, sensors, and cameras are more expensive, and the labor needed for car repair is going up in price as well. Inflation in parts and labor translate into higher premiums.
• An increase in risky driving: Risky driving behavior, like speeding, and accident rates have gone up. In 2022, 42,514 people died on US roads, a 10% increase compared to 2020. Riskier driving behavior means more auto insurance claims and higher premiums.
• More litigation: A rise in litigation related to auto accident claims is a potential contributing factor to increasing premium costs, according to the Insurance Information Institute. More lawsuits and payouts from insurers mean higher premium prices for consumers. Those ads on TV and billboards for personal injury attorneys promising to deliver huge payouts to those injured in car or truck accidents have taken a toll on insurance company profits, and we all have to pay more as a result.

What Can Consumers Do?

Drivers are increasingly shopping around for better rates. A report from J.D. Power found that 49% of car insurance customers shopped for a new policy within the past year. Consumers who switched insurers within the past five years snagged median annual savings of $461.

Drivers can also do some research on potential discounts. Insurance carriers may offer discounts when you bundle home and auto policies. You may also be able to find discounts based on your mileage, allowing insurance company apps to monitor your driving, or by signing up for a defensive driving course.

As a last resort, drivers could consider switching to public transit, eliminating the expense of car insurance entirely. But 45% of Americans do not have public transportation as an option and most individuals likely can’t address their transportation needs for work, school, or errands without relying on privately owned vehicles, regardless.

The Bottom Line

While it is possible prices could car insurance prices could stabilize in the future, premiums are expected to get more expensive in 2025. Factors like more expensive car repairs, accident rates, and litigation are still at play.

For consumers who need to drive, insurance continues to be a necessary expense. You can consider switching insurance carriers and asking about potential discounts to find better rates.