Tariffs Set to Increase Car Insurance Premiums

It will come as no surprise to any car owners that the cost of their insurance has risen considerably over the course of the past two years. Insurance companies have listed multiple factors as contributing to their need to raise rates. The most common reasons listed, in addition to a swell in the number of claims, are the increased cost of both new and used cars, sky-rocketing medical expenses, a shortage of parts and their inflated prices. Now in addition, tariffs are set to the increase car insurance premiums to new highs.

Tariffs and Car Insurance Rates

The exact amount, and possible carve-outs, is not yet known; but a 25% duty on goods imported from Mexico and Canada are what’s currently on the table. With more than 30% of auto parts used in the U.S. coming from Canada and Mexico, there will be no way for our domestic importers to avoid using these parts, and passing the higher costs to dealers and body shops. This will increase insurance companies cost to repair vehicles, which will cause higher insurance premiums. Beyond parts, Mexico and Canada are responsible for approximately 35% of our steel, and over 50% of our aluminum, both critical in building cars and trucks, which will inevitably materialize in the form of higher vehicle prices and repair costs, leading to higher insurance rates for everyone.

Tariffs impact Car Insurance Premiums.

Charlie Hutcherson, an insurance analyst with Global Data, stated:
“The recent trade measures introduced by the U.S. government will have significant repercussions across the automotive and insurance industries,” “The tariffs on imported auto parts from Mexico and Canada will drive up costs across the supply chain, making vehicle repairs more expensive and contributing to rising insurance premiums.”

Accepting risk is at the very core of any insurance company’s business model; but it’s imperative they understand all variables present, so as to best calculate their cost. Insurance carriers are also particularly concerned that these sudden increases in costs is not factored into the pricing of their currently active policies. These tariffs leaves them exposed to higher claims than they anticipated at the inception of the policy. The American Property Casualty Insurance Association (APCIA) raised concern that the announced tariffs could increase car insurance premiums by as much as $24 billion dollars. Auto insurers also fear future tariffs against additional foreign firms. As an agent specializing Auto Insurance, I can safely state the last ting customers want are higher prices.

Larry Lubell /March 21, 2025

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