MarketWatch investigates reasons behind rising insurance costs and policyholder risk

A new report from MarketWatch shares the realities some drivers are facing in the current U.S. economy as they shoulder more obligations and risk when buying auto insurance and attempting to manage monthly costs.

“Amid record-high rates of drivers shopping around for new policies, more policyholders are paying higher deductibles,” the report states. “When accidents happen, more drivers are personally paying for repairs instead of filing claims that could push up their premiums. A growing share of drivers have too little coverage — or none at all. There’s even evidence that in extreme cases, more people are defrauding insurance companies to try to get cheaper coverage.

“Though auto-insurance prices are projected to level off in 2026, lower insurance-company profits may push more costs onto consumers.”

J.D. Power’s 2025 U.S. Auto Claims Satisfaction Study, released in October, shows that 26% of auto insurance customers now have deductibles of $1,000 or more, and 7% of auto insurance customers say they’ve avoided filing a claim for fear their rates could rise.

MarketWatch includes the dilemma from the perspective of Kelly, in her early 40s, who viewed auto insurance as a “non-negotiable” expense for decades until she lost her job after Hurricane Beryl in July 2024. She eventually let her coverage expire to control her costs, the report states.

“When Kelly found her current job working with clients with mental-health needs, she wanted to resume coverage with her insurer, Progressive,” the report states. “But even with a discount from a three-year safe-driving record, her coverage lapse and a bad credit score pushed her quoted premium to $476 a month.”

That would have been an 80% increase compared to her previous full coverage policy, so she opted for liability coverage at $215 per month after being ticketed for not having insurance.

“As of 2023, more than 15% of drivers had no insurance, according to the latest data from the Insurance Research Council, an organization supported by property and casualty insurance companies and associations,” the report states. “The share of drivers without insurance climbed from 2019 to 2023, the Insurance Research Council data showed.

“During that same period, the average annual cost for comprehensive car insurance went from $1,207 to $1,438, according to the National Association of Insurance Commissioners.”

Fitch Ratings’ North American insurance group and The Zebra, an insurance shopping website, told MarketWatch they don’t see premiums coming down anytime soon.

LexisNexis U.S. Auto and Home Insurance Senior Vice President and General Manager Jeff Batiste said he expects elevated rates of consumers shopping around for insurance to continue this year.

One factor MarketWatch says contributing to increased rates is repair costs.

“Consider a cracked windshield. Fixing one used to mean installing new glass, rubber gaskets, and adhesive,” the report states. “With today’s more sophisticated vehicles, there are often cameras and sensors that have to be removed and possibly replaced. There are ‘more and more features that add to the cost of repair,’ said Bob Passmore of the American Property Casualty Insurance Association, a trade group.”

Passmore added that when carriers determine premiums, their core focus is the estimated repair cost, according to the report. He told MarketWatch that between 2020 and 2025, there was a 40% increase in auto parts costs for insurers, increasing repair costs 20%.

Tariff increases and collision severity trending upward have also contributed to rising insurance costs for consumers, according to MarketWatch.

While drivers are increasing their deductibles to make their premiums more affordable, Ryan Mandell, Mitchell International’s vice president of strategy and market intelligence, told MarketWatch he doesn’t believe deductible averages will fall below $800 this year.

Gerry Glombicki, a Fitch Ratings senior director, noted that raising deductibles comes with risks since drivers may not be able to afford the higher amount if an accident occurs. He said those who can’t effectively don’t have insurance, according to the report.

Aaron Schulenburg, Society of Collision Repair Specialists executive director, told MarketWatch there are now more incidents where drivers are paying their deductible along with an out-of-pocket portion that the insurer didn’t. He’s also heard of more customers paying the entire amount themselves so as not to file it on their insurance for fear of it increasing their premiums.

Collision Advice’s Mike Anderson told MarketWatch that out of 200 collision repair shops, 20% of repair orders are now paid completely by the customer instead of the insurer. He noted that’s an increase from 12.7% in 2024 and from 7-8% three or four years ago.

“For the foreseeable future, customer pay is going to stay pretty strong,” Anderson said, according to the report.

Unaddressed damages, such as to safety systems or cutting corners with cheaper parts, will likely become more common, according to Anderson and Schulenburg.

The report also notes that “premium avoidance,” a type of insurance fraud in which policyholders lie about certain details to get lower rates, is on the rise, according to the National Insurance Crime Bureau.

“There was a ‘steady increase in premium avoidance’ between 2010 and 2019, the organization said,” the report states. “It dropped off during the pandemic, when people drove less — and peaked again in 2024.”

It adds that some drivers’ misrepresentations to their insurers could become law enforcement cases, according to Jessica Rust, the bureau’s director of intelligence and analytics.

“Auto insurance is supposed to be a financial firewall when things go wrong on the road,” the report states. “By bearing more risk, consumers’ trust may be getting tested — at a time when they really want to understand the value they’re getting for their money. The rise of ‘customer pay’ and out-of-pocket payments above a deductible can shake drivers’ confidence, said Schulenburg… They may be caught between repair experts saying one thing and the insurer saying another. That casts doubt about what’s the right thing to do throughout the entire repair process.”

Friction between insurers and collision repair facilities on the coverage of OEM-recommended or required repairs is a common issue and is often discussed at repair industry meetings.

Recently, Frank Cote, former chief deputy insurance commissioner and government affairs director for the Montana Commissioner of Securities and Insurance (CSI), said the collision repairs that auto manufacturers say need to be done should be. He was interviewed by Schulenburg on stage during the Collision Industry Conference (CIC) Nov. 4 meeting in Las Vegas.

“We want to understand what the manufacturer says because we don’t want to be doing things that aren’t needing to be done and adding cost, but if the manufacturer is saying it needs to be done and you don’t do it, think about that $42 million claim [John Eagle case] because that’s you,” Cote said.

Cote mentioned a right-to-appraisal bill is expected to be filed during Montana’s next legislative session. Texas and Washington passed RTA bills earlier this year after several years of work with legislators.

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