The economic forces behind insurance affordability

David Seider is chief commercial officer at TheZebra.com, an insurance comparison platform.

For years, drivers have been feeling the pinch at the pump, dealership, and repair shop, as car ownership-related prices continue to escalate. But often their biggest pain point is paying more for auto insurance bills, which have spiked significantly since 2020. 

Per the Bureau of Labor Statistics, premiums surged more than 64% between September 2020 and September 2025, an increase that was more than double the general inflation rate of 25% recorded during the same period. A recent survey by TheZebra.com reports that 27% of respondents indicated they didn’t even have enough in emergency savings to afford their car insurance deductible (which can often be as low as $250) in the event of an accident. 

What’s changed is not just how much premiums have risen, but how unevenly they now hit. Insurance affordability is no longer a shared national trend. It’s splitting along state lines, shaped by local risk, regulation and cost pressures.

Today, the average American driver currently forks over $2,256 yearly for car insurance, according to The Zebra's 2026 State of Insurance: Auto Report. Since 2016, rates have risen a whopping 74.6%, although premiums have climbed at a more moderate 3% between 2024 and 2025 – much lower than the 18% increase observed the year prior. Still, the median premium as a percentage of income that Americans pay today is 2.6%, a higher share than many might expect.

But that national average doesn’t tell the entire story. Year-over-year premiums increased in 29 states, but rates dropped in 21 states. These price swings were dramatic in six states that observed rate jumps exceeding 50%, and in a handful of cases, premiums more than doubled year over year.

So what’s driving these persistent price pressures?

Cost factors behind the climb

This rising rate trend is fueled by two primary factors: increasing costs and growing risks. The economic ripple effects of global tariffs, inflation and continued supply chain disruptions have caused vehicle repairs and medical care to be more costly than ever. When a fender bender happens, the price tag associated with high-tech replacement parts and needed labor is simply much steeper than it was just a few years back. 

When it comes to risks, the culprits are more localized. Many areas are experiencing more extreme weather events, including floods and hailstorms, that lead to huge claim payouts. Plus, in some particular ZIP codes, an uptick in uninsured motorists, along with a greater frequency of serious accidents, has compelled carriers to adjust their models.

Our data also indicate that repair costs remain elevated, contributing to higher overall claims expenses. Carriers have had to adjust premiums in response to increasing costs for parts and labor. 

These cost and risk pressures don’t affect every state equally, and that uneven effect is becoming more pronounced. Consider that drivers in Maine paid 36% less for car insurance recently, but rates in Louisiana and Nevada doubled year-over-year. It’s this lack of uniformity that underscores how localized risks are increasingly affecting affordability, perhaps more than national economic trends.

A new way to measure price pressures

To better understand how these data show up in people’s lives, it helps to look beyond premiums in isolation. One approach is to compare insurance costs with median local income (as captured by the Zebra Premium Pressure Index), offering a clearer view of affordability at the state level.

By that measure, drivers in Arkansas, Louisiana, Florida and other high-pressure states are spending close to 5% of their annual income on auto insurance alone. In Florida, for example, a mix of no-fault laws, hurricane exposure and a high share of uninsured drivers pushes costs higher. In many cases, these pressures reflect legislative and environmental factors that sit largely outside individual control.

The question becomes whether any meaningful relief is on the horizon.

What to expect later this year

Looking ahead, rates are projected to rise in 19 states and fall in 13, with insurers likely to compete more aggressively for low-risk drivers, creating more opportunities for consumers who shop around.

The Zebra also anticipates broader adoption of new tech. For example, “pay-per-mile” policies are likely to become a standard option for infrequent drivers and hybrid workers. And although self-driving cars won’t be taking over anytime soon, more insurance products tailored to autonomous vehicles are expected, including specialty coverage that splits accident liability between the manufacturer and the owner. This would mark a shift in how driver responsibility is assigned.

Look for many insurance companies to move away from broad, across-the-board premium increases and toward more targeted rate cuts in certain markets. Costs are still expected to rise this year, but at a much slower pace than in previous years. Affordability pressures will persist, though the era of 18% spikes appears to be in the rearview mirror.