Rising Car Insurance Costs: Impact on Consumers and Insurers

A recent survey from The Zebra underscores how rising car insurance costs are prompting consumers to alter their insurance practices, a development with significant implications for insurers and the collision repair industry.

The 2026 State of Insurance report indicates that the average annual cost of car insurance has escalated to $2,079, pushing consumers to retain older vehicles and trim insurance coverage. This behavioral shift aligns with observations from collision repair shops, which are handling an aging vehicle fleet and fewer insured repair claims, as more vehicles are being classified as total losses. Data from CCC Intelligent Solutions shows that by 2025, vehicles aged 7 to 12 years accounted for 41% of total loss evaluations, a rise from 33.4% in 2020.

Consumer Behavior Shifts

According to Beth Swanson, an insurance analyst at The Zebra, these trends are consistent across various demographic groups. "Around two-thirds of consumers plan to keep their cars until they are too expensive to repair across nearly all demographics," Swanson noted. This trend is especially evident among those earning less than $75,000 annually and individuals with poor or fair credit scores. The survey reveals that if insurance costs surged by 10%, 45% of respondents would consider reducing coverage or increasing deductibles, while 29% would potentially cancel or suspend their coverage entirely.

Coverage and Risk Implications

The propensity to drop coverage is notably higher among Gen Z drivers and those with current deductibles over $1,000, with 48% and 38% of these groups considering such actions, respectively. This trend correlates with an increase in uninsured or underinsured motorist claims, which comprised 16.3% of third-party claims by late 2025. Swanson expressed concern about the 29% of drivers contemplating insurance cancellations, highlighting the potential for heightened risk within industry coverage pools. "Understandably, drivers are looking for every opportunity to cut costs these days," she commented. The potential rise in uninsured drivers could increase risk for all stakeholders, affecting premiums and claims management.

Potential Industry Impact

The Zebra's survey of 1,500 U.S. vehicle owners, conducted with Savanta, provides insights aligned with U.S. Census Bureau demographics. While The Zebra's report did not directly link premium hikes to coverage lapses, it noted that 57% of drivers are reducing vehicle use to alleviate fuel costs, which may somewhat mitigate the uninsured driver issue. Yet, the overarching concerns related to coverage lapses and total loss frequency still demand strategic responses from insurers.

What Insurers Should Watch Next

As consumers adapt to rising insurance costs, insurers must refine their strategies to address these changes. Opportunities exist for developing new products that offer more affordable and flexible coverage options. Educating consumers on risk management and the long-term benefits of maintaining adequate insurance coverage will be essential. As the market continues to evolve, insurers and industry professionals need to closely monitor how these trends unfold, examining both the short-term financial impacts and potential long-term industry shifts.