MW Tariffs could increase car-insurance prices. Here are 3 moves to cut costs - and one to pump the brakes on.
Andrew Keshner
The insurance industry could pay anywhere from $27 billion to $53 billion extra in the next 12 to 18 months because of the tariffs' toll, a trade group says
Drivers haven't been able to catch a break on their auto insurance for several years, and the road ahead doesn't look so smooth - but there are still ways to save money.
First, rising costs for auto-repair parts and labor sent car-insurance premiums soaring as a four-decade-high inflation rate burned through the economy starting in 2022.
Now comes an array of Trump administration tariffs on certain raw materials, auto imports and car parts. The tariffs on auto imports could be 25%. The extra duties will hit car buyers up front, but could also seep into the replacement costs that insurers watch when they set premium prices, experts say.
Though some tariffs are already in effect, another series of levies were scheduled to be unveiled Wednesday as the Trump administration seeks to boost domestic manufacturing. Tariffs on auto-related imports are supposed to take effect Thursday. They could tack an extra $15,000 on car prices, by one count.
The full weight of these tariffs could increase yearly auto-insurance costs on a single vehicle to more than $2,750 from approximately $2,300, according to an analysis from Insurify, a rate-comparison site.
That jump wouldn't happen overnight. Insurers first need to analyze price impacts and get approval for rate hikes from state insurance regulators.
The insurance industry could pay an extra $27 billion to $53 billion over the next 12 to 18 months as a result of the tariffs, according to one expert at an insurance trade group.
For individual drivers, there won't be a uniform price hike on their insurance premiums because different vehicles have different amounts of U.S.-sourced parts and labor, said Robert Passmore, department vice president at the American Property Casualty Insurance Association.
But insurance is a matter of pooling risks and costs. "No matter what kind of car you have, there will be some impact," Passmore said. The organization's members write 60% of the country's private passenger-auto policies.
"All tariffs are a tax and they are inflationary," said Gerry Glombicki, senior director at Fitch Ratings. "Those costs borne by insurance companies, they are going to seek to pass them on to the insured."
Now for the good news: There are still alternate routes for cost-conscious drivers - and now could be a great time to snag savings before tariffs slowly trickle into policy prices.
One way to save money on car insurance: Shop around before tariffs affect premiums
The search for cheaper car insurance really started in late 2022 and it hasn't stopped, according to Stephen Crewdson, managing director of insurance business intelligence at J.D. Power.
Last spring, annualized price increases surpassed 22%. They've cooled off since then; prices were up 11% in February, according to the Bureau of Labor Statistics.
Drivers have been on the hunt for better rates. More than 13% of people told J.D. Power researchers that they had shopped for auto insurance to find a lower premium last quarter, tying a record. Crewdson is expecting the share of car-insurance shoppers to grow even more in 2025's first quarter.
When inflation began socking the economy, some insurers hiked their rates faster than others, Crewdson noted. People who switched quickly to a slower-hiking insurer could've found at least a brief interlude of lower prices. Premiums typically run on six-month terms.
It's possible drivers could pull off that same feat as tariffs start to take hold.
Some insurers have acknowledged it's difficult to know exactly what tariffs will mean for policyholders and their own bottom lines. In a March earnings call, Progressive Corp. $(PGR)$ Chief Executive Tricia Griffith told analysts the timing of any price increases from the insurer would be a state-by-state story.
"I think if things go as planned, I think it will be more second half [of 2025] and into 2026," Griffith said, according to an AlphaSense transcript. Progressive did not immediately respond to a request for comment.
Another strategy to lower premiums: Higher deductibles
Shopping around is a good move, but a switch might be more hassle than it's worth for a small amount of savings. Besides, a driver may like the insurance company they already have.
Policyholders can increase their deductibles to lower their monthly premiums - so long as they understand the risk.
With a higher deductible, the driver must pay more out of their own pocket before the insurer steps in to start covering costs. "You are deciding to self-insure more," said Glombicki. This has been one of the cost-saving tactics some consumers have been using since premiums began skyrocketing, he noted. (Similarly, as homeowner-insurance costs have risen, some people have also been raising the deductible on their policies.)
"What's happening is people are adjusting deductibles up," Jess Merten, Allstate Corp.'s $(ALL)$ chief financial officer and executive vice president, said at an investor conference last month.
The value of a $500 deductible two decades ago compared to now is "very different than a $500 deductible today," Merten said, according to a transcript. Allstate declined to comment further.
Many deductibles are now around $500 to $1,000, said Matt Bannon, a data journalist at Insurify. Policyholders can increase their deductible in the middle of a six-month term, and there shouldn't be a waiting period before the higher deductible and lower premium kicks in, said Passmore.
Increasing a deductible means taking the chance of paying the full amount of a claim. Before taking this step, people need to consider whether they could afford the whole expense, Passmore noted.
"The first dollars of insurance are always the most expensive, because there are more small claims than big claims," he told MarketWatch.
Drivers can save money by letting their insurer track their driving - but be careful
Carriers will offer apps to track driving behavior, which the industry calls telematics. Some insurers require enrolled users to keep an app open while driving and others have devices connected to the covered cars, said David Seider, chief commercial officer at the Zebra, an insurance-comparison site.
The Zebra has seen a 14% annual increase in customers shopping on the site who already have coverage and are looking for better rates.
These tracking functions monitor the insured driver's speed, quick accelerations and hard stops. The driving-behavior data influences the premium price over time, Glombicki said. Usually the people who know they are good drivers are the ones who sign up for these offers. But not always, he added, and risky drivers may end up paying more.
Seider agreed: "Once you open Pandora's box, it can get more complicated. So know thyself."
Bundling car and home insurance may not be as great a deal as it used to be
Bundling homeowners insurance and auto insurance is a long-established way to potentially shave costs. Buying both forms of coverage tends to make a customer stick with an insurer longer, said Seider. That's a good deal for insurers, but not necessarily for homeowners these days.
The bundle was a "slam dunk" for savings 10 years ago, but the homeowners-insurance market has changed and shoppers should do some homework.
Homeowners-insurance premiums have been rising without tariffs, and a bundle offer may rope in expensive homeowners-insurance coverage that could be cheaper elsewhere, Seider noted. "You've got to make sure the juice is worth a squeeze from a savings perspective," he said.
-Andrew Keshner
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(END) Dow Jones Newswires
April 02, 2025 15:56 ET (19:56 GMT)
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