With some U.S. tariffs already in effect and more scheduled to take effect on April 2, the magnitude of a rise in auto prices and auto insurance prices is still unknown, as is the impact of increased auto insurance prices.
Steel tariffs took effect March 12, and the pause on 25% tariffs on imports from Canada and Mexico is expected to end on April 2.
Car prices could increase by as much as $12,000, according to
Auto insurers are ready to adjust prices, according to Seider. "What they're waiting on is for the landscape to firm up a little bit, to see which tariffs will stick and which ones will not," he said. "If you overprice your rates, you're not going to be competitive and you'll sell fewer policies. You underprice your rates, you'll sell a lot of policies, but you won't be very profitable."
Auto insurers constantly seek data to predict the future, explained Laura Adams, senior analyst at Aceable, an education company specializing in driving, insurance, real estate and mortgages.
"It could be a situation where insurance companies are anticipating rate increases or price increases in not only vehicles, but lots of parts of cars that are coming from all over," she said. "Even if a vehicle is made domestically, many of its parts may come from Canada or Mexico."
Increased prices of vehicles and parts are a factor in auto insurers' rating of risk, and therefore premium prices, according to Adams. "Largely rates are based on what it costs to repair or replace a vehicle, and if that vehicle price and repair and replacement is all going up, I can see the insurance companies really licking their chops, ready to increase premiums," she said.
Seider and Adams both point to an increase in uninsured drivers as a possible impact of increased auto insurance rates.
"There is an observed trend over decades and decades that when the price of insurance goes up very quickly, the rate of uninsured motorists goes up too," Seider said. "The rate at which people are willing to acquire insurance will almost certainly decrease."
If auto insurance premiums doubled, the risk of driving would become a crisis, Adams explained. "If we see just a gentle escalation, certainly that would be ideal," she said. "But if we saw something crazy, like rates going up 50% or 100%, absolutely, I could see many people risking driving uninsured."
Aside from auto insurance to cover their own losses, consumers would need to then increase their liability coverage. "If they do get in a situation with a driver who is uninsured or underinsured, then they have enough of their own coverage to get back on the road," she said.
Big increases in auto insurance rates generally incite more shopping by consumers, with rates rising 78% over the past decade, and 19% during 2023, according to Seider.
"People see their bill from one period to the next, and they say, 'This doesn't seem doable for me anymore, and I need to find a better option, and I need to find somebody to help me do that,'" he said. "It's hard to predict exactly what the impact will be on auto insurance, because so many things are still in flux. If there is a meaningful change in auto insurance rates, it almost certainly will drive up the rate of shopping as people are trying to save money wherever they can."
