2025 Insurance Premium Forecasts

Auto Insurance Premiums

Over the past two years, auto insurance premiums in the U.S. have risen by more than 20% annually, driven by inflation, increased repair costs, and a higher frequency of claims.

But there may be good news on the horizon. In 2025, experts anticipate a moderate increase, with projections of a 3% to 5% rise. This tempering is attributed to stabilizing claims costs and frequency. However, severe weather events, labor and repair cost surges, uninsured drivers, new state regulations, and the rising prevalence of electric vehicles could continue to exert upward pressure on rates.

Home Insurance Premiums

Homeowners have experienced a 34% increase in premiums between 2017 and 2023, largely due to increased severe weather events. For 2025, forecasts suggest a continued upward trend, though at a slower pace compared to previous years.

Factors Contributing to Rising Premiums

Here are some of the primary reasons behind rising premiums:

• Inflation – The elevated costs of vehicle repairs and home construction materials have led to higher claim expenses, prompting insurers to adjust premiums.
• Supply chain disruptions – Delays and shortages in parts and materials have escalated repair and rebuilding costs, influencing auto and home insurance premiums.
• Climate change – The increasing frequency and severity of natural disasters – hurricanes, wildfires, floods – have driven up claims, impacting homeowners rates.

It’s worth noting that natural disasters in one area can affect premiums nationwide. For example, earthquakes off California’s coast or wildfires in the Great Smoky Mountains can prompt insurers to reassess risk exposures and reinsurance costs nationwide, potentially influencing rates even in areas far from the affected region.