Industry slams Trump auto insurance rate data, promise to lower premiums

A comment and promise made Tuesday by former President Donald Trump received some not-so-positive attention from the insurance industry.

“Your auto insurance is up 73% — VOTE FOR TRUMP I’LL CUT THAT NUMBER IN HALF!” the current Republican presidential candidate posted on social media platform X.

Your Auto Insurance Raised 73% — VOTE FOR TRUMP, I’LL CUT THAT NUMBER IN HALF!

— Donald J. Trump (@realDonaldTrump) September 17, 2024

Leaving aside for a moment the promise to reduce premium increases, Trump’s reference to a 73% increase in auto insurance rates “seems to have no basis in fact — at least if one insists on using credible and verifiable data sources.” said economist Robert. Hartwig, a professor at the University of South Carolina Moore School of Business and former president of the Insurance Information Institute.

Hartwig provided a link to his source – the US Bureau of Labor Statistics – and said he found “the 73% figure doesn’t seem to coincide with any key political dates” and “it’s not clear what the source of Trump’s data is or how. that number was calculated – or what period of time we are talking about.”

“Obviously, there is a historical date where the price of auto insurance today is 73% higher than it was in the past (the exact figure is 73.6%),” Hartwig wrote for Insurance journal in an email. “Using data from the US Bureau of Labor Statistics, the date is September 2016 — two months before Trump was elected and four months before he took office.”

Other sources contacted by Insurance journal could not identify the origin of Trump’s “73%”. However, Hartwig relayed the following facts:

• In the last 12 months (Aug 2023 – Aug 2024), car insurance rates have increased by 16.5%
• As of January 2021 (when Biden took office), the figure is 54.9%
• As of January 2020 (just before the start of the pandemic), the figure is 49.2%
• As of January 2017 (when Trump took office), the figure is 67.2%

David A. Sampson, president and CEO of the Home Insurance Association of America, issued a statement following Trump’s social media post to “set the record straight.”

“In the heated arena of presidential campaigns, candidates often use popular issues to connect with voters, and auto insurance has recently become one of them,” Sampson said. “However, the political rhetoric surrounding the property casualty industry has often led to confusion and misrepresentations. Understanding the factors that influence auto insurance rates can help cut through the noise and focus on meaningful ways to reduce costs for consumers.”

Regardless of whether Trump intended the post to garner the kinds of comments it received, many pointed to the illegal immigrant population as a factor in high auto insurance rates. Hartwig said he is not aware of any studies linking immigrants as a factor in high auto insurance costs or being associated with problems with uninsured motorist coverage. RJ Lehmann, senior fellow at the International Center for Law and Economics, said the same.

“I wouldn’t jump to that conclusion,” Lehmann said in an interview. “Uninsured or underinsured drivers may be a factor, but (as for illegal immigrants) I’m not aware of a study. It doesn’t appear. An uninsured driver could be anyone. Rates have risen due to claims affecting insurers’ bottom lines.”

Lehmann explained that rates rose by about 7% a year until the pandemic, when the volume of vehicles on the road dropped significantly and insurers did not raise rates at all. But since vehicles have been back on the road, studies have shown that driving behavior has declined and vehicle fatalities have increased. Insurers are “catching up,” Lehmann said, and recent reports suggest they may be. S&P Global Market Intelligence forecast a “dramatic rebound in underwriting profitability” with a 2024 personal auto combined ratio of 98.4, down from 104.9 in 2023 and 112.2 in 2022.

Premiums have gone up, Sampson said, “for the simple reason that the cost of car insurance has gone up.”

“This includes the cost of auto parts, labor, rental and trade-in cars,” Sampson continued. “Overall, the severity of traffic accidents has increased, leading to more expensive medical claims. To put all of this into perspective, auto insurance claims and expenses rose to over $1.12 for every $1 in premium in 2022. Therefore, car insurance rates have increased in 2024 even as inflation has started to decline. Insurance prices are lagging behind inflation.”

Related: Car insurance price inflation is overstated, Swiss Re economists say

Over the past five years, vehicle repairs are up nearly 21 percent, repaired parts are up about 24 percent and used car values ​​are up nearly 26 percent, Sampson said. In addition, there has been a 319% increase in personal injury awards over the past decade, he added. A summary of auto insurance rates from the Insurance Information Institute highlights these factors.

Returning to Trump’s claim that it can affect auto insurance rates, Hartwig said, “That’s a lie.”

“Someone should explain to Trump that insurance — and insurance rates — are regulated by the states, not the federal government,” Hartwig said. “If Trump on day 1 could wave and cut auto insurance rates by 50%, auto insurance would instantly stop being sold by any auto insurer in the United States. The reason, of course, is that if insurers were forced to sell car insurance at 50% of the current price, this would lead to enormous losses and the eventual insolvency of the insurer – so they would not sell at all.

Lehmann said he believes “Trump doesn’t think about federal regulations” and that he or Congress can’t do anything about the state regulatory system in place. However, a president could fund road infrastructure improvements or campaigns with agencies like the National Highway Traffic Safety Administration to promote safety.

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