Impact of Immigration on Car Insurance Premiums: A Fact Check
President Donald Trump recently attributed the decline in car insurance premiums to his stringent immigration policies, inaccurately suggesting that illegal immigration during the Biden administration caused previous premium increases. On Truth Social, Trump shared a graphic indicating premium changes from 2021 through 2026, highlighting an increase from 2021 to 2023 and a decrease starting in 2024. This data, sourced from the Bureau of Labor Statistics and analyzed by the Council of Economic Advisers, captures industry trends.
While the data aligns with industry observations, experts assert that the premium rise was mainly due to the COVID-19 pandemic. Factors such as increased road risk and supply chain issues elevated repair costs. Insurers are now reducing rates to stay competitive, benefiting from improved financial stability. There is no substantial evidence linking illegal immigration to fluctuations in insurance premiums.
Michael Clemens, an economist at Johns Hopkins University, states, "This claim is pure fiction," highlighting the lack of support from the White House, auto insurance industry, or anti-immigration groups. When the pandemic began in March 2020, decreased driving led to fewer accidents and claims, boosting profit margins for insurers. This environment prompted rate reductions as companies aimed to attract customers.
As driving levels increased in 2022 with the pandemic's retreat, accidents and claims surged. Experts point to reckless and distracted driving, alongside supply chain disruptions, as influencing premium increases. By 2024, rates declined once more with decreasing accidents and stronger financial positions for insurers.
Mark Friedlander from the Insurance Information Institute notes, "Average auto insurance premiums have begun to stabilize," as the industry experiences underwriting profits and implements rate reductions. Major insurers like State Farm and USAA have also distributed dividends to policyholders.
A study in the Journal of Insurance Issues suggests a correlation between higher populations of illegal immigrants and increased numbers of uninsured drivers, which can affect premiums in states that restrict licensing for such individuals. However, this does not explain the approximately 50% premium surge post-pandemic. Clemens estimates immigration spikes during the Biden era account for only a modest 0.07% of premium increases.
In his post, Trump reiterated unfounded claims about the Biden administration's immigration policies. Nonetheless, recent studies and expert insights emphasize economic and pandemic-related factors as the primary drivers of variations in the auto insurance market.