CarInsurance.com’s 2026 State of Car Insurance

Why premiums are still high in 2026

Several structural forces continue to keep car insurance premiums elevated: Vehicle repair costs, high claim severity, weather-related losses and the concern about tariffs.

Vehicle repair costs

Vehicle repair costs remain a major driver, as modern cars rely on advanced sensors, cameras and safety systems that are expensive and time-consuming to fix after a crash, according to CCC Intelligent Solutions’ Crash Course report.

“The advanced technology in vehicles is helping reduce the frequency and severity of losses, but it is also making cars much more expensive to repair after collisions,” said David Marlett, the managing director of the Brantley Risk & Insurance Center and IIANC professor of insurance at Appalachian State University.

Claim severity

Claim severity is also rising. Car insurance claim severity refers to the average cost of claims paid out by an insurance company. It’s a key metric insurers use to assess risk and set premiums.

In simple terms, severity measures how expensive a claim is — not how often claims happen. For example, a fender bender in a parking lot has low severity while a multi-vehicle highway pileup with serious injuries has high severity.

Insurers track severity alongside frequency because the two together tell the full story of loss experience. A company could see fewer claims but still face rising costs if each claim becomes more expensive. This combination ultimately shapes what policyholders pay in premiums.

At the same time, vehicle miles traveled have returned to pre-pandemic levels, increasing overall exposure to accidents. The Federal Highway Administration projects total VMT for all vehicle types to grow at an average rate of 0.7% annually over the 20-year period through 2043.

Weather-related losses

Weather-related losses add another layer of pressure. Hailstorms, floods, hurricanes and other severe weather events damage large numbers of vehicles each year, contributing to volatility in insurer losses.

In 2024, the United States saw 27 confirmed weather and climate disasters with losses topping $1 billion each, including one drought, one flood, 17 severe storms, five tropical cyclones, one wildfire and two winter storms, the National Centers for Environmental Information (NOAA) reported.

Tariffs and car insurance: When could higher costs reach drivers?

Tariffs on vehicles and auto parts remain a concern for the auto insurance industry in 2026. While their immediate impact has been less severe than initially feared, experts warn that cost pressure may be delayed rather than avoided.

“Recent analysis indicates the impact of tariffs has been milder than initially feared. That said, some of the pressure could be delayed into 2026 as existing inventories work through the system and replacement costs continue to rise,” Holeman said.

Tariffs matter because they raise the cost of vehicles and replacement parts, which directly affects claim severity. 

“Because tariffs can raise costs for vehicles and auto parts, they matter directly for auto insurance claim severity and affordability, especially when paired with already-high repair complexity and supply chain constraints,” Holeman said.

Importantly, these higher costs tend to show up gradually. Drivers are more likely to feel the impact at renewal, often 12 to 18 months after costs rise, rather than immediately after policy changes or trade announcements.