Car Insurance Is Up 57%. Insurers Were Losing Money the Whole Time.

Nathan Paulus -headshotNP
By Nathan Paulus
Edited by Venus Zoleta

Updated: May 8, 2026

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Replacing the rear bumper on a new Toyota RAV4 runs around $3,000 today, compared to roughly $500 on a 2010 model. The gap isn't inflation. Modern bumpers are packed with cameras, parking sensors and radar units that all require recalibration after any collision, adding $550 to the average claim before labor, paint or parts are factored in.

Full coverage now averages $2,575 a year, a 57% increase since early 2022, per MoneyGeek's analysis across all 50 states. It's easy to assume insurers are pocketing those gains, but the data points the other way. U.S. personal auto insurers paid out more in claims and expenses than they collected in premiums for three straight years before 2024. Rates spiked because the industry was losing money, not because it was profiting from drivers.

What a Combined Ratio Tells You

When an insurer's combined ratio exceeds 100%, it's paying out more than it earns. Personal auto hit 104.9% in 2023, according to Fitch Ratings. For every $100 collected, insurers paid out roughly $105. The industry ran those losses for years before rates caught up. Personal auto's combined ratio fell to 95.3% in 2024, the first year below 100% in recent memory. The broader property and casualty industry posted a combined ratio of 96.5% that year, its best result since 2013.

A 2019 peer-reviewed study published in the NAIC's Journal of Insurance Regulation found that auto insurance costs correlate with medical inflation at a coefficient of 0.986, near-perfect correlation, and that insurer profits were "zero or negative" during the 2014 to 2017 analysis window even as consumers paid rising premiums. CCC's Q4 2025 data puts the same finding in current numbers: bodily injury costs are rising three to four times as fast as general economic inflation. Claims costs outran what insurers were collecting for years running.

The chart below tracks both trends from 2019 to 2026. Each bar shows how fast premiums rose that year, measured by the Bureau of Labor Statistics' CPI motor vehicle insurance index. Red bars mark years when insurers paid out more than they collected, while blue bars mark profitable years. The orange line shows how many dollars insurers paid out for every $100 they collected in premiums. Above the $100 threshold, they're losing money. Where the line is dashed with circular markers, the data is estimated or projected rather than final.

Bar and line chart showing annual car insurance premium inflation from 2019 to 2026 alongside the personal auto combined ratio.

Insurers paid just $93 for every $100 collected in 2020, the lowest point in recent history, but not because the industry fixed its cost problem. Fewer people were on the road, so fewer claims came in. Once driving resumed, claims costs surged and the loss cycle began.

4 Forces That Drove Claims Higher

Three years of underwriting losses don't happen by accident. Four structural forces drove claims costs well above what insurers collected in premiums, and none of them are going away.

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    Smarter cars are more expensive to fix

    Advanced driver assistance systems (cameras, radar and lane departure sensors) are now standard on most new vehicles. By 2028, the Highway Loss Data Institute projects ADAS will be present in half or more of all registered vehicles. Those systems need recalibration after any collision that moves or replaces the components. Calibrations now appear in roughly 30% of repair estimates, according to CCC. Electric vehicles cost on average $1,030 more to repair than gas-powered vehicles and require nearly four more labor hours per job, which is why EV insurance runs higher than standard policies. The average repair bill reached $4,768 through September 2025. Every new ADAS-equipped car sold adds another high-calibration vehicle to the future claims pool.

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    Medical inflation is built into every bodily injury claim

    Bodily injury liability claims are among the fastest-rising cost drivers in personal auto insurance. The average third-party bodily injury paid outcome reached $27,600 per injured party through mid-2025, up 35% since 2020, according to CCC. Average CT scan charges rose 45% over the same period. Treatment duration increased 29% in the past year alone. CCC's Q4 2025 data shows bodily injury costs are increasing three to four times as fast as general economic inflation. When medical billing runs at that pace, premiums follow regardless of what the vehicle damage portion of the claim costs.

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    Rising premiums are pushing more drivers off coverage

    More than one in seven U.S. drivers, 15.4%, had no car insurance in 2023, according to the Insurance Research Council. With underinsured drivers included, the figure reaches 33.4%, or one in three. That's a 10-percentage-point increase in the combined rate since 2017. As premiums rise, some drivers drop coverage they can no longer afford. The uninsured pool grows, and insured drivers absorb those costs through higher uninsured motorist rates. The IRC attributes the trend directly to "deteriorating insurance affordability," meaning rising premiums are partly creating the conditions that push premiums higher still.

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    Tariffs on imported parts are hitting repair shops

    The newest pressure hit on May 3, 2025, when 25% tariffs on imported auto parts took effect. A large share of replacement parts used in U.S. repair shops comes from abroad. Average parts costs rose more than 6% in both the second and third quarters of 2025, according to CCC. A survey of 500 repair shops conducted in April 2025 found 38.6% reported some tariff impact, with 73.7% of larger shops reporting higher operational costs. AM Best projects the overall property and casualty combined ratio will rise to 96.9% ($97 paid out per $100 collected) in 2026. Triple-I/Milliman estimates the personal auto combined ratio at 94.4% for 2025, one of the better results in recent years, but tariff-driven parts costs threaten to push it higher.

What This Means for Car Insurance Rates

Rate growth is slowing but hasn't stopped. The BLS motor vehicle insurance index rose 16.5% in 2024 on an annual average basis, with monthly readings exceeding 22% at the April peak. By 2025, the annual average dropped to 5.9%, and the December-to-December change fell to 2.8%, the smallest year-end increase in five years. MoneyGeek's current national average of $2,575 per year reflects rates that finally caught up to claims costs.

Claims costs haven't stopped rising. Low-credit drivers pay $2,310 more per year than drivers with excellent credit, according to MoneyGeek's analysis of factors that affect car insurance costs. ADAS complexity, medical inflation and an aging vehicle fleet are all pressing costs higher, with no sign of reversing. Tariff-driven parts inflation is already showing up in claims data. Rate increases are slowing, but the pressures behind them aren't.

Why Some States Avoid the Pattern

The national average obscures a range that stretches from $75 to $243 a month, and that spread isn't random. Vermont's low rate reflects the structural opposite of every force driving the national average higher: low population density, fewer claims, minimal litigation exposure and a low share of uninsured drivers. Florida's high rate reflects all four of those forces in reverse. Mandatory no-fault personal injury protection coverage means insurers pay medical bills regardless of fault, creating a reliable target for staged-accident fraud.

Florida also has one of the country's highest uninsured motorist rates, frequent hurricane-season comprehensive claims, and a litigation environment that historically allowed one-way attorney fee shifting. Vermont is a low-claims, low-fraud, low-litigation state, and its rates show it. Florida is the opposite. Most states fall somewhere between those two poles, and where a state lands explains far more about your rate than any single national trend.

Methodology

MoneyGeek's rate data reflects full coverage premiums collected from major insurers across all 50 states and Washington, D.C. The national average of $2,575 per year represents a composite rate for a 40-year-old driver with good credit and a clean driving record. State-level averages reflect the same benchmark profile. For the full state-by-state breakdown, see MoneyGeek's average car insurance cost analysis.

About Nathan Paulus

Nathan Paulus headshot

Nathan Paulus is Head of Content and SEO at MoneyGeek, where he leads content strategy and produces original data research across insurance, consumer costs, transportation safety, housing, public policy, and personal finance. He also reviews published studies for methodology, source quality and factual accuracy before they reach readers.

Research and Analysis

In nearly six years at MoneyGeek, Paulus has published more than 100 original studies and explanatory guides. His insurance research includes 50-state comparisons of health care outcomes, costs and access; an analysis of how uninsured rates track with state Medicaid expansion decisions and electoral patterns; full-coverage auto rate analyses across major insurers in all 50 states; and a study of how premium trends track with industry underwriting losses, with combined ratio data sourced from Fitch Ratings, AM Best and Bureau of Labor Statistics CPI figures. His research also covers vehicle pricing trends across the U.S. new car market, summer traffic fatality rates by state, homeowner underinsurance ratios using mortgage and policy data, and housing affordability across all 50 states.

His research has been cited by Bloomberg, the Los Angeles Times, Forbes, Fast Company, the San Francisco Chronicle, USA Today and NBC Los Angeles. Harvard, MIT, Stanford and Yale have also referenced his work.

Career

Growing up, Paulus developed an early interest in personal finance through his grandmother, who emphasized saving over earning as the foundation of financial stability. Her framing still shows up in how he writes about money for people without a financial background.

Paulus joined MoneyGeek in July 2020 as Director of Content Marketing. In that role, he led the content team and directed data journalism production across insurance and personal finance verticals. He was promoted to Head of Marketing and Communications in December 2023, where he took on digital PR and communications strategy. He has held his current role as Head of Content and SEO since January 2025.

Before MoneyGeek, he served as Director of Content Marketing and SEO at Ventrix Advertising. There, he helped build two content sites from scratch, contributed to link-building programs that secured more than 1,500 unique referring domains within a year, and co-managed a marketing team of more than 20 people. Earlier, he spent two and a half years at ABUV Media, moving up from Marketing Research Analyst to Senior Marketing Tactics Analyst, where he built his grounding in audience research, content strategy and SEO.

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