Auto insurance has become one of the fastest-rising household expenses in the United States. While grocery bills and vehicle prices have increased over the past few years, insurance premiums have climbed at an even steeper pace.
According to the Bureau of Labor Statistics, average auto insurance rates jumped 64% between 2020 and 2025, leaving millions of drivers wondering what caused such a dramatic increase.
President Donald Trump recently blamed illegal immigration for the spike in insurance costs. However, economists and insurance experts argue that the data tells a very different story. Their analysis points to several economic and industry-related factors that have had a much larger impact on premiums than immigration.
Trump’s Claim on Rising Insurance Costs
President Donald Trump addressed the issue in a Truth Social post, arguing that American drivers were paying higher insurance premiums because of illegal immigration.
He wrote, “Car Insurance Premiums rose to RECORD HIGHS, forcing Law-abiding American Citizens to subsidize the ‘free riding’ Biden Illegals.” Trump also claimed that after “over a year of ZERO ILLEGAL IMMIGRATION” and efforts to reverse what he described as the “Biden Invasion,” insurance premiums had “come tumbling down.”
Although insurance rates have shown signs of slowing in recent months, experts say the president’s explanation does not match available research or industry data.
Economists Reject the Immigration Argument
Michael Clemens, a professor of economics at Johns Hopkins University and senior fellow at the Peterson Institute for International Economics, strongly disputed Trump’s statement.
He said, “This claim is pure fiction.”
According to Clemens, there is no evidence from the White House, the auto insurance industry, or even organizations that advocate stricter immigration policies to support the claim that illegal immigration caused the sharp rise in insurance premiums.
He added that the argument “has no basis in anything but inflammatory statements that juxtapose two unrelated trends.”
Trump’s comments were based on a report from the Council of Economic Advisers using data from the Bureau of Labor Statistics. Critics argue that the report was interpreted incorrectly.
While uninsured drivers, including some undocumented immigrants who cannot legally obtain driver’s licenses or insurance in many states, may have contributed slightly to insurance costs, Clemens estimated that this factor accounted for only about a 0.7% increase in premiums during the Biden administration.
The Real Reasons Insurance Premiums Increased
The much larger increase came from several events that unfolded after the COVID-19 pandemic.
One of the biggest changes involved driving behavior. During lockdowns, traffic volumes dropped as millions of Americans worked from home. Empty roads encouraged excessive speeding and more dangerous driving habits. The California Highway Patrol reported record numbers of citations and arrests in 2020 and 2021 involving drivers traveling more than 100 miles per hour.
These riskier driving patterns resulted in more severe accidents. Insurance companies faced larger claim payouts, which eventually translated into higher premiums for policyholders.
Repair expenses also climbed rapidly. The pandemic disrupted global supply chains, creating shortages of replacement parts ranging from body panels to electronic components and microprocessors. The semiconductor shortage became so severe that automakers such as General Motors and Toyota reduced vehicle production by millions of units.
Repair shops frequently waited weeks or even months for replacement parts after collisions. At the same time, supply shortages pushed part prices much higher, increasing the overall cost of vehicle repairs. Insurance companies absorbed those higher claim expenses before passing much of the cost on to customers.
According to the Bureau of Labor Statistics, the average American driver pays about $2,250 to $2,350 per year for auto insurance. Costs vary widely by location. Drivers in cities such as Detroit, Las Vegas, and New Orleans often pay more than $5,000 each year.
Vehicle theft has also remained an important factor in determining insurance prices, especially in regions with higher crime rates.
Why Rates Have Started to Slow
Insurance premiums are no longer rising as quickly as they did during the peak inflation years. Over the last 18 months, several insurers have introduced rate reductions as financial conditions improved and regulators increased pressure in many states.
State Farm announced an average 10% rate reduction for many of its customers last year.
Mark Friedlander, spokesperson for the Insurance Information Institute, said the market is beginning to stabilize.
He said, “Average auto insurance premiums have begun to stabilize. Many states are now seeing average rate decreases. Major insurers such as State Farm and USAA are also paying dividends to policyholders.”
Reports from the Associated Press also indicate that auto insurance rates are experiencing negative growth in 2026, meaning average premiums have started to decline in several parts of the country.
Factors That Could Push Prices Higher Again
Although recent trends are encouraging, experts caution that lower insurance costs are not guaranteed to continue.
Vehicle prices remain historically high. According to Cox Automotive, the average transaction price for a new vehicle has now exceeded $50,000. More expensive vehicles naturally increase repair and replacement costs after accidents, leading insurers to adjust premiums accordingly.
Trade policy could also put pressure on insurance costs. Supply chain shortages have mostly eased, but tariffs introduced by the Trump administration on imported steel, aluminum, and auto parts may raise repair expenses again.
Insurance comparison website Insurify estimates that these tariffs could add up to $200 a year for drivers with comprehensive coverage. Many replacement parts still depend on imported materials, which can increase repair costs.
Understanding What Drives Auto Insurance Prices
Auto insurance premiums are affected by many economic and industry factors, not just one issue.
Experts, insurance companies, and federal data show that rates increased sharply between 2020 and 2025. The main reasons were risky driving during the pandemic, higher repair costs, supply chain delays, vehicle theft, inflation, and rising vehicle prices.
Experts say undocumented drivers had only a small impact on insurance costs. Their contribution was minor compared to the overall increase in premiums. Insurance rates have started to stabilize in many areas.
Even so, future costs will mostly depend on inflation, repair expenses, vehicle prices, and overall economic conditions rather than immigration alone.