The recent policy announcements from the White House suggest that many US auto insurers and claims specialists will be paying more for spare parts, which of course means higher premiums to pay for those claims. Should increase the salvage vehicle pool as well as more older cars become uneconomic to repair after a shunt.
Here’s the word from GlobalData;
With the recent 25% tariffs imposed on goods imported from Mexico and Canada, the cost of vehicle repairs is expected to rise in the US, placing additional pressure on insurers to increase car insurance premiums, which are already among the highest globally, according to GlobalData, a leading data and analytics company.
GlobalData’s 2024 Emerging Trends Insurance Consumer Survey reveals that 53.5% of US consumers pay over $1,000 annually for car insurance. In comparison, only 21.0% of UK consumers report paying more than GBP750 ($966), while just 16.9% of Chinese consumers state their premiums exceed CNY7,000 ($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.
Charlie Hutcherson, Insurance Analyst at GlobalData, comments: “The recent trade measures introduced by the US government will have significant repercussions across the automotive and insurance industries. The tariffs on imported auto parts from Mexico and Canada will drive up costs across the supply chain, making vehicle repairs more expensive and contributing to rising 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 the American Iron and Steel Institute (AISI), Mexico and Canada accounted for approximately 35% of US steel imports last year, while Canada supplied nearly half of the country’s aluminum 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.
Hutcherson continues: “As US consumers are already paying some of the highest car insurance premiums globally, the tariffs are likely to exacerbate the situation. Rising repair costs will force insurers to adjust pricing models, and many consumers may see their premiums increase further. To navigate these challenges, insurers must focus on improving claims cost management and exploring alternative solutions such as telematics-based policies and strategic partnerships with repair networks.”
Hutcherson concludes: “The knock-on effect of higher tariffs will be felt across the entire automotive ecosystem. Consumers, insurers, and manufacturers will all have to adapt as costs rise. For insurers, retaining customers in a competitive market will require innovative pricing strategies and cost-effective solutions to help offset the financial strain caused by these policy changes.”
*GlobalData’s Emerging Trends Insurance Consumer Survey featured a panel of consumers aged 18+, with 5,520 respondents spread across 11 countries in different regions to identify global trends. There was a minimum of 500 respondents per country. It is GlobalData’s first-ever dedicated multi-market insurance consumer survey.
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