Trump tariffs to drive US car insurance costs even higher

GlobalData surveying has found that US car insurance premiums are higher than those in other countries. With the recent 25% tariffs imposed on auto parts imported from Mexico and Canada, the cost of vehicle repairs is expected to rise, placing additional pressure on insurers to increase insurance policy prices.

GlobalData’s 2024 Emerging Trends Insurance Consumer Survey reveals that 53.5% of US consumers pay over $1,000 annually for car insurance. In contrast, only 21.0% of UK consumers report paying more than £750 ($966) while just 16.9% of Chinese consumers state their premiums exceed 7,000 yuan ($963). Among all 11 countries included in the survey, none have a higher proportion of consumers paying $1,000 or more for car insurance than the US.

Meanwhile, President Trump has extended his aggressive trade strategy by targeting Mexico and Canada with duties of 25%, which is set to drive up costs across the automotive industry, impacting both vehicle prices and insurance premiums. The rising costs stem from the integrated supply chains that auto companies have established with manufacturers in Mexico and Canada, which play a critical role in the US automotive industry.

According to Insurify, Mexico and Canada accounted for approximately 35% of US steel imports last year, while Canada supplied nearly half of the country’s aluminium imports. Additionally, more than 30% of total auto parts used in the US were imported from these two countries, reflecting the industry’s reliance on cross-border trade to keep costs down. Beyond auto parts, one fifth of the cars and light trucks sold in the US originate from Mexico and Canada, meaning the tariffs will directly impact vehicle prices. As these costs ripple through the supply chain, they are expected to affect consumers through higher insurance premiums, as insurers face rising claims expenses due to more expensive repairs and replacements.

To mitigate the impact of rising costs, insurers may need to reassess their pricing models, enhance claims cost management, and explore the greater adoption of telematics-based policies. Additionally, expanding partnerships with repair networks and sourcing alternative, lower-cost replacement parts could help offset some of the financial strain caused by the tariffs.