Nobody likes to get a bill, but when it comes to car insurance, chances are you’ve been extra wary of receiving your renewal letters lately. With average car insurance rates increasing by over 30 percent in the past two years, drivers across the country are wondering when they can expect some financial relief. The good news is that the break we are all looking for may already be here. The bad news is that most of us aren’t feeling it in our bank accounts.
Are car insurance rates stabilizing?
With an average annual full coverage premium of $2,638, Americans spend 3.39 percent of their median household income on car insurance, according to Bankrate’s 2025 True Cost of Auto Insurance report. Full coverage car insurance rates increased by an average of 12 percent from 2024 to 2025, which is lower than the 17 percent increase from 2023 to 2024. Understandably, any increase in auto insurance rates is unwelcome from a driver’s standpoint. However, that 5 percentage point difference may signal a slowdown in rate increases in the future, which is a step toward rate stabilization.
Rate stabilization occurs when insurance companies achieve financial stability by collecting enough in premiums to cover claims and operating expenses. This is also known as rate adequacy. According to a report from J.D. Power, many carriers stated they were approaching rate adequacy in 2024, but this doesn’t mean that rates will get cheaper. Instead, this signals that future increases may be lower and slightly more manageable for drivers.
Like most consumer goods, car insurance rates tend to increase over time, but usually at a much slower pace than we have experienced over the last few years. Vehicles, parts and labor, and medical expenses are just some of the goods and services that impact the cost of auto insurance. Generally speaking, when the costs of these items increase, so does your car insurance.
Inflation peaked in 2022, but didn’t really hit auto rates until 2024 because of state regulations on when carriers can increase rates and by how much. Car insurance inflation is also known to be “sticky,” meaning its impact is stubborn and takes a while to fade, if it does at all.
What are “normal” auto insurance premiums?
While many of us wish that car insurance costs would return to normal, what does normal even mean? Car insurance rates are calculated with both risk and economic factors in mind. Data from the Insurance Information Institute (Triple-I) shows that from 2012 to 2021, average annual insurance rate increases were as high as 6.7 percent and as low as -2.4 percent.
It’s important to note that the surprising 2.4 percent rate decrease in 2020 was a result of the pandemic’s low driving rates. Annual mileage remained below anticipated levels for most of 2020, prompting policyholders to question why they were still paying so much for auto insurance. This resulted in $13 billion in rebates to policyholders, which artificially lowered auto rates for 2020.
Historically, insurance rates usually outpace inflation. The latest Consumer Price Index (CPI) report shows auto insurance increased 0.3 percent from January 2025 to February 2025 and 11.1 percent from February 2024 to February 2025. Comparatively, the February year-over-year inflation rate for all items was 2.8 percent.
In addition to inflation impacting things like vehicle parts and replacements, car insurance has been increasing steadily for over a decade due to longer-term issues like more complex vehicle design, extreme weather and litigation.
Recent rate hikes have enabled carriers to achieve double-digit premium growth, narrowing the gap between premiums collected and claims and expenses paid for losses.
Mark Friedlander, senior director of corporate communications for the Insurance Information Institute (Triple-I), says that the combination of underwriting profits and legislative reform is helping to keep rates stable. When carriers adjust their underwriting — the process used to evaluate risk — to account for changes in the insurance environment, rate increases are more likely to occur in the higher-risk pools instead of across the board. Updates in legislation can help protect policyholders from overreaching carriers and limit fraudulent lawsuits against insurers.
One way insurers generate income is through underwriting profits, when the premium collected exceeds what is paid out in profits and operating expenses. According to Triple-I, the U.S. personal auto industry generated an underwriting profit in 2024, the first time since 2020. “A premium growth rate of 14.1 percent in 2024 followed a 14.4 percent premium growth in 2023,” says Friedlander. “We project the underwriting profit trend will continue through this year.”
Legislative reform to address legal system abuse is also a significant factor in improving market performance. In Florida, the top three national auto insurers operating in the state – State Farm, Geico and Progressive – plan to file for average rate decreases this year because of a 500% year-over-year decrease in auto glass claim lawsuits following legislation passed in 2023, which eliminated one-way attorney fees and assignment of benefits for glass claims.
— Mark Friedlander, Senior director of corporate communications, Triple-I
While rates won’t suddenly return to what they were a few years ago, some drivers may start to see more marginal rate increases when their policies renew in 2025 and 2026.
Some states already show signs of slowing rates
Rate stabilization depends on several factors, and some are inherently less predictable than others. While slowing inflation can help create more favorable economic conditions, tariffs on U.S. imports are likely to increase auto insurance rates in the coming years.
Twelve states had average annual rate increases last year that fell within or below Triple-I’s 2012-2021 historical norms (less than 7 percent annually). Conversely, only two states had increases low enough to be seen as “normal” from 2023 to 2024 — New Hampshire and Wyoming.
| State | Avg. premium increase from 2024-2025 | Avg. 2025 full coverage car insurance premium |
| Alabama | 2.27% | $2,038 |
| Alaska | 2.89% | $2,387 |
| Hawaii | 5.56% | $1,689 |
| Indiana | 6.20% | $1,723 |
| Kansas | 3.64% | $2,518 |
| Mississippi | 1.34% | $2,149 |
| Missouri | -10.87% | $2,578 |
| Montana | 0.73% | $2,394 |
| New York | 5.38% | $3,916 |
| Oregon | 2.45% | $1,984 |
| Pennsylvania | -0.28% | $2,467 |
| Wyoming | 3.55% | $1,747 |
Rate stabilization does not equal affordability
Car insurance affordability isn’t just about the premium, it is also household income. Bankrate’s 2025 Pay Raise Survey asked respondents: In the past 12 months, have you gotten a pay raise at your current job, gotten a better paying job, neither or both? About two in five (39 percent) respondents said neither. In the big picture, slowdowns in auto insurance increases are a positive sign that car insurance rates are stabilizing. But, on an individual level, any rate increase means less money in your pocket and a tighter budget, especially if the rate increase is outpacing any income increases.
The pressure of rising auto insurance rates can be disproportionate. For lower-income individuals who spend a higher percentage of their earnings on insurance, premium increases are more financially straining compared to higher-income individuals who can absorb the costs more easily.
New York and Louisiana have very similar average auto insurance rates, but more Louisiana drivers may struggle to pay these rates due to the state’s lower median household income. As of January 2025, average full coverage car insurance in Louisiana costs $3,978 per year, and in New York it’s $3,916 per year. However, due to their lower median income, Louisiana drivers have to fork over 6.83 percent of their income for car insurance compared to New York drivers’ 4.77 percent.
Contrary to popular belief, slowing inflation does not mean prices are falling. Rather, prices are just not rising as quickly as they once were. While there’s hope that the worst insurance premium hikes may be behind us, many of the costs that consumers — and insurers — pay are costlier today than they were before the pandemic. Until their wages catch back up to those rapid increases, Americans might continue to feel like their budgets are getting stretched.
— Sarah Foster, Principal U.S. Economy and Federal Reserve reporter, Bankrate
Bottom line
While many signs point to auto insurance rate stabilization, it isn’t guaranteed. Car insurance is composed of several moving parts, including risks related to extreme weather, car thefts, litigation, costs of parts and labor, and personal driving history. A disruption in any of them could impact premiums. And the impending monkey wrench of President Trump’s new tariffs and how they affect auto insurance could take several months to materialize. The best drivers can do to minimize rate fluctuations is to control what they can by maintaining a clean driving record, comparing quotes regularly and searching for possible discounts.
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