The rise of auto insurance premiums across the nation has sparked commentary in the national campaign agenda addressing a mounting issue for consumers.

Last week, Congresswoman Yadira Caraveo (D-CO), currently in a heated race in her state, introduced HB9618 or the “Lowering CAR Insurance Act.” 

Caraveo says in a press release that it’s part of a larger plan aimed at lowering costs for working families in Colorado. Her plan also includes initiatives to lower grocery prices and childcare costs and offer low-income household water assistance. 

“One of the main concerns I hear from working families is the cost of living — they are struggling to cover the most essential living expenses,” Caraveo says in the release. 

The act requires the Federal Insurance Office to submit an annual report to the president, the Committee on Financial Services of the House of Representatives, and the Senate’s Committees on Banking and Housing and Urban Affairs. 

Each report should include recommendations to lower the cost of automobile insurance and any other information about the auto insurance industry that is “deemed relevant.” 

The act would take effect 90 days after enactment, which is unlikely to happen during this session with less than four months left. 

Caraveo’s bill was filed a day after former President Donald Trump posted on X that he would cut car insurance costs in half. 

Insurance News Net interviewed Ray Lehmann, International Center for Law and Economics editor-in-chief and senior fellow, to dig into what role the federal government could play in reducing auto insurance costs. 

“To know what the former president is intending to propose, you would need more details than he’s given so far,” said Lehmann. “But insurance is a state-regulated system. The federal government has very little to do with insurance rates and the best they could do is contribute to making the roads safer through things like the NHTSA [National Highway Traffic Safety Administration].” 

However, Lehmann’s comments don’t address HB9618. If the bill was to pass or a version of it, it could possibly change the role the federal government could play in regulating auto insurance. 

Lehmann told Insurance News Net that the federal government could invest in NHTSA to do more aggressive distracted driving campaigns. He said the federal government also has tools to lower inflation, which could reduce insurance claims costs. 

Lehmann said there are things that Congress and the president could do to lower rates but promising a specific number is difficult.

“There are things you can do to make the road safer,” Lehmann said. “There are things you could do to address social inflation or what juries are coming back with as verdicts, but how that shakes out in actual rates is kind of a longer-term issue and not something that can be done immediately. Not without bankrupting the industry anyway, which doesn’t serve anybody.”

The U.S. Department of Transportation reports that motor vehicle insurance has continued to contribute to inflation at 17.6% in August 2024 — the greatest contribution since July 2016 (recordkeeping of this statistic began in 2012).

Motor vehicle insurance became the No. 1 transportation contributor to inflation in December 2022 and, as of August 2024, remains the top contributor.

Last week, the Federal Reserve lowered its benchmark interest rate by half a percentage point, which will make it cheaper to get a car loan, finance a business, or carry a credit card balance, according to NPR.

Federal Reserve Chair Jerome Powell mentioned the effect the cost of insurance has on inflation during testimony to the Senate Banking, Housing and Urban Affairs Committee earlier this year.

“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.

Powell went on to add that the Federal Reserve doesn’t have any regulation authority over the cost of insurance. Insurance oversight mostly happens at the state level with each state having its own process and set of regulations.

He added the federal government might have to step in if insurers continue to leave coastal markets.

A recent report from Insurify states that in the first half of this year, full-coverage annual insurance premiums were hiked another 15% to $2,329 on top of post-COVID increases over the past couple of years. Insurify’s data science team projects a total 22% increase by the end of the year.

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