Motor Vehicle Insurance is noted as one contributor to the consumer price index rising to 3.5% Wednesday, according to a report released by the U.S. Bureau of Labor Statistics (BLS). 

The 12-month inflation rate increased from 3.2% in February at an acceleration faster than expected, according to multiple media outlets. The increase also likely means the Federal Reserve won’t be making an interest rate cut in June like previously expected. 

Multiple media agencies, such as the Associated Press and Reuters, are now reporting September as the earliest the Federal Reserve would likely make a cut to the interest rate, if it makes any this year. 

The BLS reports indexes that increased in March were shelter, motor vehicle insurance, medical care, apparel, and personal car. Indexes that decreased were used cars and trucks, recreation, and new vehicles. 

The AP notes that the costs of owning a vehicle are “key reasons why prices jumped last month.” 

Auto insurance increased by 2.6% in March from February and a 22% increase from a year ago. Auto repair costs increased 1.7%, up 8.2% in a year. Gasoline costs also increased 1.7% in March with an annual increase of 1.3%. 

Yahoo Finance reported Wednesday that auto insurance’s 22.2% annual increase is the largest since December 1976 when prices increased 22.4%. 

The article says more auto insurance increases are likely coming. 

“While the magnitude of rate increases is likely to ease somewhat, after several years of double-digit increases, some lingering claim cost inflation and adverse claim severity and frequency will likely lead to a ‘higher for longer’ auto rate environment,” CFRA analyst Cathy Seifert told Yahoo Finance.

Federal Reserve Chair Jerome Powell mentioned the cost of insurance on inflation during testimony to the Senate Banking, Housing and Urban Affairs Committee last month. 

“It is clear that insurance of various different kinds, housing insurance but also automobile insurance and things like that, that’s been a significant source of inflation over the last few years, and it’s to do with a million different factors,” Powell said during the hearing held March 7.

Insurers point to pandemic losses from part delays, rising labor costs, and used car values as causing the hiked rates in recent years. The rate hikes continually receive criticism from consumer advocacy groups who’ve claimed insurers are overstating needs and overburdening the consumer. 

As insurers raise premiums, collision repair shops have simultaneously noted an increase in consumer responsibility for out-of-pocket expenses due to short payments. 

Insurance also remained one of the top industries that spent money on lobbying in 2023. It only trailed behind the pharmaceutical and electronics manufacturing industries, according to data released by Statista.

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