Car Insurance Outlook 2025 – Forbes Advisor

The auto insurance forecast calls for financial pain as experts predict rates will continue to rise in 2025. Spiking repair costs and claim frequency with an uptick in uninsured motorists are still having a major impact on insurers and vehicle owners.

But there’s a ray of sunshine in the form of improvements in claims and quote processes. To better understand auto insurance trends for 2025, we spoke to several industry experts about what we can expect.

Car Insurance Premiums Poised to Keep Climbing

You’re not alone if you’ve been hit with a car insurance rate increase in the last year. Costs have been steadily going up since the pandemic. The Consumer Price Index shows that auto insurance rates have increased monthly since December 2021, with a 16.3% jump from September 2023 to September 2024.

“As driving patterns returned to normal, claim frequency increased,” says Paul Choi, president of the collector car division at NSM Insurance Group. “Coupled with higher repair costs, this led to a significant rise in claims, impacting insurers’ loss ratios and leading to rate increases.”

Choi believes that car insurance premiums will start to come down, citing industry data that shows that claims costs and frequency are stabilizing. “As a result, I expect that insurance rate increases will taper off, with premiums returning to more typical inflationary trends of 3% to 5% in 2025,” he says.

Other experts weren’t so optimistic.

While consumers could be hopeful that the cost of automobile insurance will decline, don’t hold your breath, says Dustyne Bryant, a director at The National Alliance for Education & Research.

Bryant says more severe weather claims and increasing claims costs due to rising costs for labor and repair parts are fueling rate hikes. But those aren’t the only reasons. She says—perhaps ironically—people switching auto insurance companies to get lower rates can also drive up prices overall.

She offers this example. You bought car insurance from Company A for $1,500 a year. After a $20,000 claim, your premium doubled to $3,000 a year. It then increased again to $3,450 a year because of a 15% rate increase in your state. You switched to Company B for $2,500 a year. In total, you paid Company A $4,500 in premiums, but they paid out $20,000 in claims.

“Would you be happy if you gave someone $20,000 and they only repaid you $4,500? Probably not. This is what increased consumer shopping is doing to the insurance industry,” says Bryant.

Joshua Morey, president of the J. Morey Co., also predicts higher rates for the coming year.

“Consumers shouldn’t expect to see relief in car insurance rates for the foreseeable future,” he says. “Right now, the best way to control the cost of auto insurance is to control things that are in your power.”

He suggests increasing your deductible and buying car insurance from a company that offers claims-free or accident-free driver discounts as two ways to tackle that.

Uninsured Drivers Can Drive Up Rates

Bryant says the uptick in uninsured drivers also increases the price of auto insurance. While most states require drivers to have a minimum amount of car insurance, more and more drivers are driving without any coverage. The number of uninsured drivers increased from 11.6% in 2017 to 14% in 2022, according to the most recent data from the Insurance Research Council.

“As the cost of auto insurance rises, some drivers are choosing to go uninsured to save money,” says Choi. “This has contributed to an increase in the rate of uninsured motorists in recent years.”

Ultimately, economic factors force some drivers to decide whether to purchase auto insurance or spend their money elsewhere.

“When an individual must choose between feeding their family or paying a monthly insurance premium, the choice will be to feed the family,” Bryant says.

Although driving without car insurance is illegal in nearly every state, enforcing it can be challenging. “Without new regulations or penalties to discourage driving uninsured, this frequency of driving without insurance is unlikely to reverse in the near future,” says Choi.

Uninsured drivers who cause an accident can be financially ruined if they have to pay for damage and injuries. But uninsured drivers can also increase the cost of auto insurance for everyone else. A significant number of uninsured drivers increases the overall risk for insurance companies because they have to potentially pay out more in claims due to accidents with these drivers. To cover these potential expenses, insurers raise rates for all drivers—not just those who have been in accidents with uninsured drivers.

And if you want insurance in case an uninsured driver crashes into you, buying uninsured motorist coverage will increase your own costs further.

Insurance Technology Spurring Quicker Claims and Quotes

Car insurance experts predict that new technologies will pave the way for better underwriting, claim handling and efficiency in 2025.

“Insurers are beginning to utilize AI-powered risk analysis models for better underwriting and claims management,” says Bryant. “Technology can scan through large data to find prior claims, social media evidence, purchase history and more to predict future behavior at a much faster rate than any human underwriter can.”

Bryant also notes that insurance companies are using voice analytics and image processing to investigate claims more quickly and accurately. She adds that customer service has also been at the forefront of innovations, pointing out that customers can get online car insurance quotes in as little as 60 seconds thanks to the decades worth of car insurance data.

Another incentive for auto insurance companies to invest in technology in 2025: to improve their bottom line. A recent report from AM Best found that innovative auto insurers that are good at coming up with new and better ideas tend to do better. They attract more customers, grow faster and spend less money on claims compared to their less innovative competitors.

How To Find the Best Car Insurance in 2025

Here are tips to help you find the best car insurance.

• Gather your information. You can shop for car insurance faster if you have some basic info, such as your driver’s license number and vehicle identification number, if you’ve had any tickets or accidents in recent years, and if you’ve had any gaps in coverage.
• Decide how much coverage you need. A good car insurance policy potentially has several different coverage types. Here’s a guide to determining how much car insurance you need so you can gather quotes on an apple-to-apples basis.
• Look for coverage options and discounts. Some car insurers offer enticing coverage options like accident forgiveness and/or a diminishing deductible. You can also find car insurance discounts such as good driver discounts, new car discounts, vehicle safety discounts and multi-policy discounts.
• Compare car insurance quotes. The best way to find a reasonable price is to compare car insurance quotes from multiple companies.