Motor Insurance Rate Slowdown: What to Expect in 2025

Key Factors Behind the Slowing Rate Hikes

Swiss Re highlights several reasons behind the recent slowdown in motor insurance premium growth:

Disinflation Effects: Slower overall economic inflation is easing pressure on claims costs, especially for vehicle repairs and replacement parts.
Stronger Underwriting Practices: Insurers have revised their pricing models to recover from previous financial setbacks, helping improve their profitability.
Rising Competition: A more competitive market is pushing insurers to moderate rate increases to retain or grow their customer base.

In the U.S., personal auto insurers experienced $53 billion in underwriting losses between 2022 and 2023, necessitating pricing corrections.

Recent indicators show the pace of premium hikes is cooling:

Average rate increases are projected to be around 7.5% in 2025, a notable drop from 16.5% in 2024.
Leading insurers such as Geico and Progressive are reducing rates in states like Florida.
The March 2025 CPI showed a 0.6% monthly drop in auto insurance prices, bringing annual growth down to 7.5% from 11% in February.

In the U.K., similar patterns are emerging:

Motor premiums rose 25% in 2023, but future increases are expected to be more subdued.
There was a 9% year-over-year drop in renewed personal auto policies in Q4 2023, while new policy underwriting rose by 11%, signaling intensified competition.
Insurers are adjusting rate strategies to remain competitive and retain policyholders.

While the slowdown in premium increases offers relief to consumers, several factors may still impact the future:

Tariffs on imported vehicles or parts could drive up repair costs and premiums.
Social inflation—increased litigation and broader societal trends—may continue to inflate claim values.
Climate-related risks and natural disasters could put further pressure on insurers’ loss ratios and pricing models.

Despite these uncertainties, the overall outlook suggests a shift toward a more stable and predictable motor insurance market in 2025.