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See our Advertiser Disclosure.CCatherine BrockTue, March 31, 2026 at 5:12 PM GMT+2 7 min readHigher prices on car repairs and medical treatments increase what car insurance companies pay to resolve claims. Insurance providers often don’t absorb those increases — they pass them to you as higher auto insurance premiums.Find out which claims-related costs are getting more expensive, why these trends are affecting your insurance rates, and what you can do to keep car insurance affordable.This embedded content is not available in your region.Learn more: Cheapest car insurance companiesInflation is the gradual rise in prices across an economy. It’s often discussed as a single percentage that represents how much prices have increased over the past year. But price increases are never uniform across all categories. Some costs go up faster than others.In recent years, car accident costs have been among the fastest-rising expenses. Several trends have contributed to this, including the following.Modern vehicles have more complexity and require more expensive parts. Jae E. Lee, founder and managing partner at personal injury firm Jay Lee Law, noted that even minor damage on newer-model cars can cause pricey repairs.The labor portion of repair costs is also on the rise, due to an ongoing shortage of skilled mechanics. Ford CEO Jim Farley recently said the automaker is having trouble filling 5,000 mechanic positions, even though those roles pay nearly double the median U.S. salary.When used cars command higher prices, auto insurance companies must fund bigger total-loss payouts. The Manheim Used Vehicle Value Index, considered a leading indicator for used-car inflation, spiked in 2021 and has remained elevated since.The automotive industry has been plagued by supply chain issues for years. Evolving trade regulations and tariffs, as well as geopolitical risks, are factors. Long timelines for receiving parts translate to higher rental car reimbursements for auto insurers.Bodily injury claims cover medical expenses arising from car accidents. In 2016, the average bodily injury claim was $16,082. Eight years later, the average had increased 75.8%, while the average property damage liability claim rose by 70.6%. Rising medical costs and evolving litigation practices have contributed. According to Michael Arrigo, an experienced expert witness in health care claims cases, older legal precedents and the use of medical billing liens and letters of protection in bodily injury cases can “artificially inflate the ‘reasonable value’ of medical bills presented at trial or mediation.”According to Bureau of Labor Statistics (BLS) data, the cost of car insurance increased more than twice as fast as general inflation between 2020 and 2025. As you can see in the comparison below, auto insurance inflation outpaced general inflation most dramatically in 2022, 2023, and 2024.ZIP code is a major factor in insurers' risk assessment, but it’s not the only risk flag, explained Jeffrey Nadrich, founder and managing attorney at Nadrich Accident Injury Lawyers.Other drivers with blemishes on their applications could also see outsized premium increases. But Nadrich believes lower-income drivers in urban areas may feel the most pressure when insurance premiums rise.“When inflation causes premiums to increase, these low-income drivers have the least options to cut costs without sacrificing important coverage,” Nadrich said.“[Urban drivers] face higher base insurance rates based on their ZIP code alone regardless of how spotless their driving record may be,” Nadrich explained.Urban drivers also face a higher theft and vandalism risk. Their premiums will be set to cover inflated used car values and higher costs for parts and labor.Drivers with recent accidents or tickets on their driving records will pay insurance rates that reflect generally higher claims costs.Learn more: How much does car insurance increase after an accident? EV owners will see higher premiums related to the complexity and high cost of vehicle repairs.Drivers in California, Florida, Texas, Louisiana, and other high-risk areas for extreme weather could pay more as car insurance companies reassess the impact of extreme weather on the frequency and cost of auto claims.“Insurers know rate increases alone aren’t sustainable,” said Jeremy Jawish, CEO of insurance tech company Shift Technology. That’s one reason why, Jawish explained, insurance companies are turning their focus to “operational efficiency and loss control.”Strategies under this umbrella include:Investing in technology to detect fraud, automate simpler claims, and identify high-risk claims faster.Tighter underwriting practices are becoming commonplace as insurance companies use technology and data to improve how they identify and price risk.Exiting high-risk markets: When regulatory rate caps limit premium increases, insurance companies may decide to leave the state entirely. As an example, several large insurance companies left California’s auto insurance market in recent years.Encouraging usage-based insurance: “Insurers are trying to link premiums to each driver’s specific behaviors on the road instead of just raising their premiums all around,” said Lee. Usage-based insurance provides the driving data required to make those individualized risk assessments.Learn more: Best car insurance companiesYou can’t control inflation, but you can take steps to manage your auto insurance premiums. Try these strategies to ensure you’re getting the lowest rates available:Drive safely: Avoiding tickets and accidents is often the surest way to prevent big increases in auto insurance.Comparison shop at every policy renewal: Gathering quotes before each policy renewal is the simplest way to confirm that you’re paying a competitive rate.Raise your deductible: Higher deductibles on comprehensive insurance and collision insurance translate to lower premiums. This strategy only makes sense if you have enough cash savings on hand to cover the higher deductible.Bundle policies: Buying your auto and homeowners or renters insurance from the same company can save you 10% or more.Ask about discounts: Ask current and prospective insurance companies how to maximize your discounts. If it’s practical, quote policies at different mileage levels and then adjust your driving habits to match.Consider usage-based insurance: If you drive conservatively, consider trying usage-based insurance. Your safe driving habits could offset other risk flags on your application.Drop unnecessary coverage on older cars: You may not need collision and comprehensive insurance on your older vehicles. Consider the car’s value relative to the cost of coverage and your deductible.Improve your credit: Most states allow insurance companies to evaluate your credit report when making pricing decisions. In those states, a better credit rating could mean a lower insurance bill.Learn more: Car insurance rates are climbing. Here are 4 reasons why and 11 ways to save.According to four experts, auto insurance rates will continue to rise in 2026, but probably not at the levels experienced in 2023 and 2024. This group predicted moderate, low single-digit increases for the year.Craig Martin, executive managing director of J.D. Power’s Global Insurance Intelligence team, expects to see “stable or potentially moderate auto premium increases in 2026.”Jenna Bailey, founder and lead trial attorney at Bailey Law Firm, predicted persistent upward pressure on rates with slow — not surging — increases.Lee anticipates statewide insurance premium increases of 1% and 4%, with the chance of larger increases once insurers price in the impact of tariffs on auto parts.Zander Cook, CRO at lease buyout firm Lease End, noted that “insurers are still underwriting losses for previous years, which means rate increases are likely to continue or hold flat at best.”Learn more: Cheapest car insurance for teensInflation and other factors have driven auto insurance rates higher. Fortunately, rate increases may be slowing down in the short-term as insurers find other ways to control costs and mitigate losses. Even so, driving safely, shopping around, and adjusting coverage can help you manage the rate increases you’ve already absorbed and stay ahead of any new ones headed your way.Tim Manni edited this article.