Why are car insurance rates down 5% from a year ago?
Car insurance: −5.0% in the 12 months to September 2026 (U.S. Consumer Price Index), versus +3.7% for prices overall. 1-month −0.3%, 3-month −1.4%, 5-year +49.4%.
Inflation check: Falling while prices rise. −5.0% in a year, versus +3.7% for prices overall.
The short answer
- Car insurance premiums are declining year-over-year after a cumulative 49.4 percent five-year surge because auto insurers achieved robust underwriting profits and reached rate adequacy following steep post-pandemic losses. [1] [2] [3]
- Rates are falling faster than the overall consumer price index as major national carriers introduce price cuts and competitive discounts to protect market share while collision frequency and vehicle replacement costs ease. [1] [3] [4] [5]
What's driving the price
Political, regulatory and trade factors
- Regulatory approval of catch-up rate filings (Sep 2023 to Feb 2026), State Insurance Departments: State insurance commissioners approved dozens of double-digit rate hikes across major states like California and New Jersey to satisfy statutory solvency requirements after carriers absorbed tens of billions of dollars in underwriting losses between 2021 and 2023. [pushed prices up] [2] [6] [7] [8]
Macro factors: supply, weather, disease, energy
- Surge in vehicle repair complexity and parts costs (Sep 2021 to Feb 2026): Auto repair and maintenance costs climbed 45 percent over five years as modern vehicles packed with advanced driver assistance sensors, complex electronics, and battery systems drove up average collision repair bills far faster than general inflation. [pushed prices up] [8] [9] [10]
- Industry swing into large underwriting profits (Feb 2026 to Sep 2026): Private passenger auto insurers swung from severe deficits into multi-billion-dollar underwriting profits, pushing auto combined ratios down to roughly 86 to 93 and ending the necessity for further rate hikes. [pushed prices down] [2] [3] [11]
- Stabilization of used vehicle valuations and collision frequency (Feb 2026 to Sep 2026): Easing vehicle replacement prices following record highs above 50,000 dollars, along with falling accident rates, reduced loss ratios on physical damage coverage and enabled premiums to decline despite persistent 3.7 percent overall inflation. [pushed prices down] [4] [5] [12] [13]
Retail, brand and seasonal factors
- Competitive rate cuts and policyholder dividends (Feb 2026 to Sep 2026): Major carriers shifted from repairing balance sheets to aggressive policy acquisition, led by State Farm lowering auto rates by roughly 10 percent and issuing a 5 billion dollar dividend, while Progressive trimmed written premiums per vehicle policy by 3.2 percent in the third quarter of 2026. [pushed prices down] [1] [5]
Supply chain right now
- Vehicle repair and physical damage (moderate): Repair costs remain elevated due to sensor and electronics calibration requirements, but replacement parts inflation has stabilized. [9] [14]
- Bodily injury and legal liability (critical): Medical cost inflation and litigation severity continue to generate persistent expense pressure on liability claims settlement reserves. [9] [15]
- Carrier underwriting and capital reserves (stable): Insurers have rebuilt surplus capital, returning auto combined ratios well below the breakeven threshold of 100. [2] [16]
- State regulatory rate administration (stable): State insurance departments have transitioned from clearing backlogged emergency hikes to approving rate reductions and premium relief filings. [5] [8] [17]
Researched 2026-10-18 with Google Search. Every point links to its sources; unsourced claims were removed.
Car insurance prices, last 12 months
| Month | Change from a year earlier |
|---|---|
| September 2026 | −5.0% |
| August 2026 | −5.1% |
| July 2026 | −4.5% |
| June 2026 | −4.1% |
| May 2026 | −2.0% |
| April 2026 | +0.2% |
| March 2026 | +0.8% |
| February 2026 | +0.2% |
| January 2026 | +0.5% |
| December 2025 | +2.8% |
| September 2025 | +3.1% |
| August 2025 | +4.7% |
| July 2025 | +5.3% |
Source: U.S. Bureau of Labor Statistics, Consumer Price Index (CPI-U), series CUUR0000SETE.
Sources
- Progressive Earnings: Car Insurance Is Getting Cheaper (stocktitan.net)
- US P&C industry records strongest underwriting profit in a decade: AM Best - Reinsurance News (reinsurancene.ws)
- Strong Underwriting, Investment Income Bolster P/C Income in 2025, Says Moody's (insurancejournal.com)
- Insurance costs hit the brakes (institute.bankofamerica.com)
- State Farm® Mutual Saves Customers $4.6 Billion in Auto Rate Reductions (newsroom.statefarm.com)
- thezebra.com (thezebra.com)
- Car insurance rates are skyrocketing in California. Here’s why (latimes.com)
- Why car insurance costs have soared (and what drivers are doing about it) (wypr.org)
- farmers.com (farmers.com)
- Car insurance rates are rising again. Here (cbsnews.com)
- State Farm Inked $1.5B Underwriting Profit for 2025; HO Loss Persists - Carrier Management (carriermanagement.com)
- The average cost of car insurance in 2026 (cnbc.com)
- Best’s Market Segment Report: US Personal Auto Insurance Segment Sustains Underwriting Turnaround Into 2025 (news.ambest.com)
- caredge.com (caredge.com)
- U.S. P&C Insurers Post Strong 92.4 Combined Ratio as Premium Growth Slows Sharply (verisk.com)
- content.naic.org (content.naic.org)
- Where Have Car Insurance Rates Decreased in 2026? - Knowledge Center (freeway.com)