Auto insurance payouts have fallen sharply over the past few decades, even as premiums have climbed, likely adding to growing consumer concerns about the overall cost of vehicle ownership.
First things first: According to a study by the Vanderbilt Policy Accelerator, Americans pay $150 billion more than they should on home and auto insurance each year, based on a lower industry claims payout ratio, or “loss ratio,” compared with historical norms, AP News reported.
For every $1 collected in premiums in 2024, insurers paid out an average of 62 cents in claims, according to the study.
That’s down nearly 20 cents from the 1980s and 1990s, when insurers averaged about 80 cents per dollar in claim payouts.
The Vanderbilt study alleges that $150 billion annually is going toward "corporate perks, corporate jets, stock buy-backs, excessive executive compensation, excessive dividends, excessive advertising, and excessive agent commissions.” Insurance industry officials dispute those claims.
What they’re saying: "Current loss ratios reflect the impact of enormous financial losses over the last several years and the steps insurers have taken (to) maintain and restore financial strength so funds are available to pay future claims," said Don Griffin, vice president for policy and research at the American Property Casualty Insurance Association, in an email to AP.
Why it matters: Rising insurance costs are becoming a bigger affordability hurdle for vehicle buyers, adding another pressure point for dealers already navigating high transaction prices, financing costs, and payment-sensitive consumers.
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Between the lines: Vanderbilt’s findings come as broader shifts in the auto insurance market reinforce consumer frustration over premium costs, with the cost of vehicle ownership already at record highs.
Auto insurance complaints rose 31.6% from 2012 to 2024, accounting for 35.6% of all insurance-related complaints, while complaints about physical damage coverage jumped 164%, according to Claims Journal.
Illinois is among the latest states to introduce legislation aimed at curbing rising auto insurance costs and addressing pricing practices.
Consumers are increasingly shopping for better rates, with 47.3% of insurance policies in force having been shopped at least once in the previous 12 months as of Q1 2026.
That marks the highest rate since LexisNexis Risk Solutions’ U.S. Insurance Demand Meter began tracking policy shopping in 2020.
Bottom line: Insurance affordability is becoming a more meaningful factor in the vehicle purchase decision. For dealers, that means the total cost of ownership conversation is becoming just as critical as the vehicle’s sticker price.
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