How will auto insurance change in 2025?

Here's what researchers are predicting for the auto insurance industry in 2025.

Shopping and switching may increase

Auto insurance premiums are expected to rise up to 5%, according to the VIU by HUB 2025 Personal Insurance Marketplace report, and the rates should counterbalance the rising costs for labor, medical and replacement vehicles. The auto rate increase was about 14% in 2023 and 2024, driven largely by inflation and natural-catastrophe-related losses.

Though this year's predicted rate hikes are much lower than in previous years, drivers are still likely to shop around for better rates. 

Data from Jerry's 2025 Sate of the American Driver report reveal that 80% of U.S. drivers said car insurance is currently unaffordable for the average person. Of those surveyed, 27% chose a higher deductible for a lower rate and 26% reduced their coverage overall. Nearly 10% of drivers said that they were unable to keep up with paying their premiums and went uninsured for at least a while; some, 30%, said they had to cut spending on clothing, and 26% said the same of buying groceries.

Younger respondents, 64% of Gen Z and 67% of Millennials, said they shopped for lower rates in comparison to 53% of Gen X and 42% of Baby Boomers who said the same. Almost a third of Gen Z, 31%, and 30% of Millennials said they switched insurers, double the 15% of Gen X and 15% of Baby Boomers who switched.

J.D. Power's 2025 Insurance Intelligence Report explains that as premium increases through the second half of 2024 improved property and casualty (P&C) insurance profitability, insurers will likely center their focus on acquiring new customers. With 2024 Q3 data showing policy shopping activity hitting a record high of nearly 14% in September and 13.6% in November, customers are very likely to continue comparing and switching for better rates.

More drivers will opt for usage-based insurance

J.D. Power also predicts that usage-based insurance (UBI) and the use of telematics will become more popular due to the discounts offered, which are based on the customer's driving behaviors. Their data shows that though many consider opting into a UBI program, only 17% of drivers actually buy this type of coverage. 

One reason for this could be that less insurance carriers were offering this type of program in 2024, where 15% of shoppers were offered a UBI program compared to 22% in 2023.

Because customer satisfaction is higher among new customers who purchased a UBI policy than those who didn't, J.D. Power experts believe that these types of offerings will increase along with the jump in shopping rates.

Digital channels will continue to boost customer satisfaction

The same report shows that the adoption of digital channels also leads to greater customer satisfaction. J.D. Power attributes much of the increased satisfaction to the services offered on mobile apps and websites, especially for the claims process. 

Customers favored reporting claims online over other methods, like contacting an agent or call center, and greatly reduced cycle times by opting to submit photos, rather than scheduling in-person inspections. The average auto repair cycle time improved by five full days, according to J.D. Power's data, and customer satisfaction improved significantly for those who used digital channels throughout the entirety of the claims reporting process.

Interest in electric vehicles is waning

Though 40% of drivers surveyed by Jerry said that they are interested in purchasing an electric vehicle (EV),  insurance rates, vehicle prices and interest rates are deterring customers from doing so. Just two years ago, 50% of customers were interested in buying an EV. Jerry's data shows that 24% of customers want to buy a new or used vehicle this year, but don't plan to do so, and 54% said that lower prices would change their minds.

Of the customers interested in purchasing an EV, 76% were motivated by the ability to save money on gas and 32% for the lower cost of ownership over a long-term period. The inconvenience of charging is the main issue for many–83% of customers said they would choose a hybrid vehicle over an EV, even if both vehicles cost the same. Of those surveyed, 9% believe it will be at least 10 years before they get an EV and 37% plan never to purchase one.