No one likes to get the bill, but when it comes to car insurance, they may be particularly wary of receiving recent renewal letters. With average car insurance rates rising by more than 30% over the past two years, drivers across the country wonder when they can expect 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 don’t feel that in our bank accounts.
Are car insurance premiums stable?
According to Bankrate’s 2025 Auto Insurance Report’s True Cost, the average annual coverage premium of $2,638 is $2,638, with Americans spending 3.39% of median household income on car insurance. Fully Covered Auto Insurance Premiums increased by 12% from 2024 to 2025, and increased by 17% from 2023 to 2024. Naturally, rising car insurance premiums are not welcome from a driver’s perspective. However, a 5% point difference could indicate a slower rate increase in the future, a step towards rate stabilization.
Fee stabilization occurs when an insurance company achieves financial stability by collecting sufficient premiums to cover claims and operating expenses. This is also known as rate validity. A report by JD Power said many carriers were closer to rate validity in 2024, but this doesn’t mean they’ll be cheaper. Instead, this signal may be slightly more manageable for drivers, with less future growth.
Like most consumer goods, car insurance rates tend to rise over time, but usually last at a much slower pace than we’ve experienced in recent years. Vehicles, parts, labor costs, and medical expenses are just a few of the products and services that affect the cost of car insurance. Generally speaking, the increased costs of these items also increase the car insurance.
Inflation peaked in 2022, but did not reach car fares until 2024 due to state regulations that allow carriers to increase rates. Auto insurance inflation is known to be “sticky.” In other words, the effects are stubborn and take a while to disappear.
What is “regular” car insurance premiums?
Many of us want the cost of car insurance to return to normal, but what does it mean? Auto insurance premiums are calculated with both risk and economic factors in mind. Data from the Insurance Information Institute (TRIPLE-I) show that between 2012 and 2021, the average annual premium rise was 6.7%, a low -2.4%.
It is important to note that the surprising 2.4% percentage decline in 2020 is a result of the low driving rates of the pandemic. The annual mileage is below the expected level for most of 2020, prompting policyholders to question why they are paying so much for their car insurance. This resulted in a $13 billion rebate on policyholders, and artificially reduced the 2020 automatic fee.
Historically, premiums usually outweigh inflation. The latest Consumer Price Index (CPI) report shows that auto insurance increased by 0.3% from January 2025 to February 2025 and 11.1% from February 2024 to February 2025.
In addition to inflation affecting the impact of vehicle parts and replacements, more complex vehicle designs, extreme weather and long-term issues such as litigation have led to a steady rise in auto insurance over the past decade.
Recent rate hikes have allowed carriers to achieve double-digit premium growth, narrowing the gap between claims and expenses paid for the premiums collected and losses.
Mark Friedlander, senior director of corporate communications at the Insurance Information Institute (TRIPLE-I), says the combination of underwriting profits and legislative reforms has helped stabilize fees. To explain changes in the insurance environment, adjusting the process used to assess risk when carriers adjust their underwriting to explain the changes in the insurance environment – is more likely to cause fee increases in high-risk pools rather than nationwide. Law updates can help policyholders protect their guardians and limit fraudulent lawsuits against insurers.
One way in which insurers generate income is to underwrite profits if the collected premium exceeds what is paid in profits and operating expenses. According to Triple-I, the US personal auto industry generated underwriting profits in 2024, the first since 2020. “The premium growth rate of 14.1% in 2024 continued to grow at 14.4% in 2023,” says Friedlander. “We expect the trend in underwriting profits will continue through this year.”
Rates won’t suddenly come back a few years ago, but some drivers may start seeing more marginal rate increases when policies are updated in 2025 and 2026.
Some states already show signs of slowing down
Rate stabilization depends on several factors, some are essentially less predictable than others. While slowing inflation will help create a more favorable economic situation, tariffs on US imports could potentially raise car insurance rates over the next few years.
Last year, the average annual increase in the 12 states fell below Triple-I’s 2012-2021 historic norm (less than 7% per year). Conversely, only two states between 2023 and 2024 are New Hampshire and Wyoming, which are low enough to be considered “normal.”
| state | average. Premium increase to 2024-2025 | average. 2025 Full Coverage Car Insurance Fees |
| Alabama | 2.27% | $2,038 |
| under | 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 is not equal to affordable prices
The affordable price of car insurance is not just about insurance premiums, but also about household income. Respondents asked Bankrate’s 2025 Wage Salary Survey: Over the past 12 months, have you gotten a wage increase in your current job and got a better pay job? Nearly two out of five respondents (39%) said neither. Overall, slower car insurance increases are a positive indication that car insurance rates are stable. However, on the individual level, a rise in rate means less pocket money and tight budgets, especially when interest rates rise outweigh the increase in income.
The pressure of rising car insurance premiums can be imbalance. For low-income earners with a higher share of revenue in insurance, the increase in premiums is more financially tense compared to high-income earners who can absorb costs more easily.
New York and Louisiana have very similar average car insurance rates, but you may have a hard time paying these rates due to the low state median. As of January 2025, Louisiana’s average fully covered car insurance costs $3,978 a year, and in New York it costs $3,916 a year. However, due to the low median income, Louisiana drivers will need to diverge more than 6.83% of their car insurance income, compared to 4.77% of New York drivers.
Conclusion
Many signs indicate a stabilization of car insurance premiums, but are not guaranteed. Auto insurance consists of several moving parts, including extreme weather, car theft, litigation, parts and labor costs, and risks associated with personal driving history. Any of those confusion could affect premiums. And the imminent monkey wrench of how it affects President Trump’s new tariffs and car insurance could take months to come true. The best driver you can do to minimize rate fluctuations is to control what you can by maintaining a clean driving record, comparing quotes regularly, and searching for possible discounts.
