According to the newly released State of Auto Insurance in 2025 report by ValuePenguin.com, a LendingTree company, insurers are raising premiums by an average of 7.5% this year — a noticeable drop from the 16.5% jump in 2024. Nevertheless, the average cost of full coverage will hit a record $2,101 annually. Below, we explore the key details and what they may mean for agents and carriers.
Key 2025 Rate Predictions
- Insurers will raise rates by an average of 7.5% in 2025, led by American Family, All State, and Liberty Mutual
- Drivers in New Jersey, Washington, and California can expect increases of over 15% — the largest in the country
- Full coverage premiums are projected to surpass $2,000 for the first time, averaging $2,101 per year
- Nevada ($3,216/year) and Florida ($3,264/year) are poised to become the most expensive states for auto insurance, overtaking Michigan ($3,156/year)
What’s Driving the Slower Rate Increase?
- Stabilization of repair and replacement costs compared to last year’s steep inflation
- Insurers adjusting rates more cautiously to manage consumer backlash and regulatory scrutiny
- Improved underwriting measures that balance rising claim costs with competitive pricing
Although rate hikes have decelerated, ongoing economic factors — such as global supply chain pressures and elevated vehicle prices — still pressure insurers to keep premiums trending upward.
High-Risk Drivers and EVs: Two Sides of the Rate Coin
- Traffic violations will trigger a 53% spike in premiums on average; in North Carolina, that could be as high as 146%
- Electric vehicles are seeing comparatively lower premium increases in 2025, but they still cost 23% more to insure than new gas-powered cars
- EVs from legacy automakers like Ford and Volkswagen are around 25% cheaper to insure than models from EV-only producers like Tesla and Rivian
This presents strategic considerations for carriers looking to fine-tune underwriting practices around emerging technologies and driving risk profiles.
Implications for Insurance Agents and Carriers
- Competitive pricing remains critical, given the widespread consumer concern over rate hikes
- Detailed risk segmentation — particularly for ev drivers and high-risk drivers — will be essential to maintain profitability
- Proactive communication with policyholders can help address discrepancies between “official” rate hikes and what customers actually experience
While 7.5% may be a more moderate jump than last year’s 16.5%, persistently high costs reinforce the need for agents and companies to reinforce their value through personalized coverage options, expanded telematics programs, and robust customer service.
Will Rate Hikes Keep Slowing Beyond 2025?
According to ValuePenguin.com insurance expert Divya Sangameshwar, the trajectory beyond 2025 looks cautiously optimistic — unless broader economic or political changes drive costs up again. If President-elect Donald Trump’s proposed tariffs on imported goods are implemented, for example, the cost of replacement parts (60% of which are imported) could rise, pushing claim costs higher. This would likely force insurers to accelerate rate hikes in 2026 and beyond.
For deeper insights, read the full State of Auto Insurance in 2025 report at ValuePenguin.com.
Disclaimer: Rate predictions are subject to change, and individual quotes may differ based on various factors, including driving history, credit score, and vehicle type.