Auto Insurance Premiums Set to Rise as Global Tariffs Drive Up Repair Costs

U.S. auto insurers are preparing for a new wave of premium increases as sweeping global tariffs on imported vehicles and parts take effect. Beginning April 3, a 25% tariff will apply to imported passenger vehicles and light trucks, followed by additional levies on key auto parts in May. These measures are expected to significantly impact repair costs and claims severity, further fueling an already inflationary claims environment.

Insurance experts caution that the double-digit tariffs will disrupt vehicle and parts supply chains, exacerbating pressures from existing cost drivers like complex vehicle technology, higher litigation expenses, and post-pandemic inflation. According to the Insurance Information Institute, the impact will be felt most acutely in auto claims, where shrinking inventories and steeper repair costs have already driven incurred physical damage losses up by over 50% in five years.

Insurify projects that auto insurance premiums could climb by 19% in 2025, with tariffs alone contributing a 7% jump. Steel and aluminum duties, along with trade shifts across North America, are also playing a role. Industry leaders at Progressive and Liberty Mutual have flagged tariff-related inflation as a growing concern and hinted at more rate filings later this year to compensate for rising loss costs.

While insurers have attempted to contain expenses through operational efficiencies, analysts warn there’s little margin left for cuts. With global trade policy adding fresh uncertainty, the pressure to pass these costs onto policyholders appears unavoidable. The industry now faces yet another economic disruption, reminiscent of the pandemic’s upheaval, but with more long-term implications tied to international trade dynamics.