A panel discussed the drivers behind soaring auto insurance inflation, including the rising complexity of repair, consumer pressures, and changing insurance practices, during the Automotive Insights Symposium held by the Federal Reserve Bank of Chicago on Wednesday.
A full recording of the conversation can be found online.
Aaron Schulenburg, Society of Collision Repair Specialists’ executive director, said vehicle complexity is probably at the top of the list.
“We are working on very sophisticated vehicles, and that is going to drive a lot of the cost,” Schulenburg said.
It’s the complexity more than inflationary pressure at this moment, he added, while acknowledging there is still inflation on things such as products used.
“You have heard a lot of talk this morning about consumer preference for safety,” Schulenburg said. “I think everybody in this room prefers a safe vehicle. That safety requires additional tasks, and additional technologies and additional repairs.”
ADAS systems require vehicle scanning, diagnostics, and calibration steps, he said.
“All of those things are probably one of the fastest growing cost drivers that we are seeing, just because they are new,” Schulenburg added.
He pointed to recent data from CCC’s Crash report that found 87% of direct repair program appraisals included a diagnostic scan in Q1 2025 and 32% included a calibration.
“I’ll tell you from my perspective that cost driver has not met its peak yet,” Schulenburg said. “That number should be much higher, and I think that is probably an indication of some of the resistance that repairers feel in that claims settlement process, that consumers feel in that claims settlement process.”
Schulenburg said some of the lag on scanning and calibrations is because not all shops, or dealers, as was referenced in a prior panel, have an understanding of the process that’s necessary. He added that many times, repairers who chose to use a dealer for calibrations will have to pull the repair procedures and explain to dealerships how to perform the repair as prescribed by the automaker.
The prior panel Schulenburg referenced was on Illuminating Innovations in Automotive Safety Technologies, in which moderator Kristin Dziczek, Policy Advisor, Federal Reserve Bank of Chicago, asked, “If insurers are using IIHS safety standards, then how are they reimbursing for those calibrations? So what are the implications, really, for independent repair shops, and others, and consumers for long-term safety outcomes of these vehicles once they’ve been involved in a collision?”
Greg Brannon, Automotive Research’s director of automotive engineering and industry relations, said any time a vehicle is tested by Automotive Research, it is done independentlym and the first step is to bring it to a dealership for a full calibration, alignment and check of all systems that will be checked.
“Oftentimes you take it to the dealer and say I would like the ADAS system calibrated on this car and you get the dog listening, the head tilt,” Brannon said. “…And this is at the dealer in many cases. That is getting better over time, it is expensive, and not many people know how to do it and do it properly.”
During the same earlier panel, David Harkey, Insurance Institute for Highway Safety president, told a similar story about a co-worker who was in a frontal crash. He said she realized something was off with her AEB system after having the vehicle repaired. She took it back to the repair shop, and the shop was unable to find the issue.
“Our technicians got into the vehicle and figured out, ‘Oh, they just needed to adjust, realign the radar sensor, it had gotten out of alignment, and it’s like the repair shop didn’t know to do that?’” Harkey said.
Neither respondent really addressed the root question.
Schulenburg also said that changing vehicle complexity includes the types of materials used, including aluminum.
“That creates challenges and costs in the system,” Schulenburg said. “It also requires a technician to ask different questions than they did many years ago.”
Thinner materials, meant to lightweight the vehicle, which house complex systems behind it, now mean those complex systems are potentially more easily damaged, and the external parts are more likely to be replaced versus repaired, he said. Replacement might now result in more refinishing or face issues with the supply chain.
Training becomes more important, he added.
“These repair businesses are spending significant amounts of money that they weren’t a decade ago, sending highly productive technicians off the shop floor to certification training to get the skill set to make those educated decisions,” Schulenburg said.
Shops not only often feel like travel agents today, but now have to cover the cost of the class and also the labor, but also the loss of productivity of “sending their most-skilled, most-productive members of their team to a class, rather than working on a customer’s vehicle,” he said.
There is a pressure for shops to build their own bench of skilled workers, and industry programs to serve that same need, because there aren’t enough certified and capable technicians in the market, he said.
During the same panel discussion, Doug Heller, Consumer Federation of America director of insurance, said state-by-state regulation also plays factors into insurance costs.
“States that have less oversight of the insurance industry see steeper increases in the rates charged to consumers than those states with less rigorous oversight,” Heller said.
A number of insurance companies aggressively set prices as inflation climbed, he said.
“A number of the big players really overshot in terms of their expectation of inflation,” Heller said. “They were building their insurance premiums as though that peak of inflation in 22 and 23 was going to last into 24, 25, and 26.”
This gave many companies and shareholders big dividends and profits in 2024 and 2025.
Without naming the company, he mentioned an insurer in Florida that had to give back $1 billion because of excessive rates.
Another factor that impacts the economy is how insurance companies segment their business, he said. He said those of lower economic conditions are often charged higher prices, regardless of driver safety.
He said, on average, the insurance premium doubles if you have a poor credit score. He said the penalty could be $1,000 for basic insurance.
“If you have a perfect driving history and a low credit score, you will pay more for auto insurance than if you have excellent credit and were convicted of drunk driving,” Heller said.
Other factors, such as whether you are a widow or divorced, could increase your rate. He added it could also change whether you rent or own.
The cost of insurance, the higher cost of repairs, and issues with tariffs hit the most vulnerable the most, he said.
“You have a huge burden put on those least able to shoulder it,” he said.
When asked about changes in policyholders’ coverage, Schulenburg said his members are seeing a change in the type of deductibles.
A $1,000 deductible was on the periphery 10 years ago but is now common, he said. He added that many repair businesses have relayed that it is not uncommon to see a deductible of $2,000 or more.
This often forces consumers to not have their vehicle repaired or wait longer to repair it, he said.
Heller said it is hard to capture the number of uninsured people.
People started dropping insurance during the pandemic because they weren’t driving or driving less, he said. This trend increased when the 2022 inflation hit and continues to grow.
“Ninety percent of Americans believe insurance should be mandatory,” Heller said about survey results. “ People want insurance. They want to be insured themselves. They want others on the road who might hit them insured. The reason people are not insured is because they can’t afford it.”
More underinsured means less dollars to pay the repair shop, he added.
He also added that the limits people have on their liability insurance are not increasing with the cost.
Uninsured vehicles, less comprehensive coverage, and unmatched limits are a problem for more than just the driver, he said. He added that banks have a stake in the vehicle as well.
Schulenburg said claims handling changes are also increasing costs for consumers.
“The total cost of repair has gone up, but it has gone up fairly minimally, like 2% in the last year,” Schulenburg said.
This is at a slower rate than policy increases, he said.
“The amount of responsibility that a consumer takes is significantly going up,” Schulenburg said.
Schulenburg alluded to a discussion that happened during a Collision Industry Conference (CIC) meeting last month.
During the CIC meeting, Andrew Batenhorst, Pacific Collision Center repair manager, said he’s seen a 40% to 50% increase in out-of-pocket expenses for parts, labor, and materials not approved by an adjuster since October. He said nothing has significantly changed at his shop during that time period, including the mix of work, repair planning, damage assessment style, or a large increase in operational costs.
“It begs the question, is it really the total cost of repair that is driving insurance rate increase, if you are not seeing it directly translate into what is being covered at the claims level for a consumer,” Schulenburg said.
Heller said his organization sees insurance as a unique product because every state except New Hampshire requires consumers to buy the private sector product.
“That creates a special obligation, we think, on the part of government to regulate the business that people are being forced into,” he said.
Regulation needs to look at the behavior of the business, including its pricing, underwriting, and how the business is interacting with the consumers.
“Consumers often get frustrated with the repair shops because the repair shops are struggling themselves to get paid,” Heller said.
He said this could lead to repair shops having two options: either eating what insurance companies don’t reimburse or cutting corners to meet insurance demands.
“But consumers get really concerned that the insurance company is making it to where they can’t get their vehicle back to the condition it was in,” Heller said. “People want the safety, and they don’t feel like the insurance market is serving that role that it is supposed to do.”
Schulenburg responded that a third option is for the consumer to pay-out-of-pocket for what the insurance company doesn’t cover.
“The problem becomes, that unlike in health care, where you are selling policies where you have both a deductible and out-of-pocket expectations, auto policies aren’t sold that way,” Schulenburg said.
He said in today’s claims environment, the collision industry often sees insurance companies refuse to pay for procedures that are outlined in auto manufacturer documents.
“[The repair shop] present it and the [insurance company] goes well we don’t believe that’s necessary so we are not going to cover it because maybe we haven’t seen enough people bill for that yet so you can handle that with the customer if you choose,” Schulenburg said.
There’s also a rise in consumers who are deciding not to file claims with insurance companies out of fear their premiums will increase or they will be dropped, he said.
He provided an example of a repair shop that told him recently that they had two claims last month that were about $5,000 repairs, and while the customers were insured, the claims were not submitted to insurance.
“I think there is something fundamentally wrong there,” Schulenburg said.
Heller said insurance companies use a “use it and lose it” methodology, where if you file two claims, you are not renewed and end up in a substandard insurance market.
Not paying for claims is a choice that upper-income individuals can make, he said. Yet, lower-income consumers rely on the insurance.
The moderator, Andy Polacek, Federal Reserve Bank of Chicago policy advisor and head of the Insurance Initiative Group, asked the panel about right-to-appraisal legislation that is happening currently in multiple states.
“I think what is interesting about the legislation that you are addressing is that it is a reaction,” Schulenburg said.
He said that a number of carriers in certain states started writing the right to appraisal, a long-time standard consumer protection, out of their policies specifically for repairable vehicles.
“It was done quietly,” Schulenburg said.
States like Texas and Washington had groups that actively lobbied for right-to-appraisal bills for years, after major carriers removed the provision for RTA on repairable vehicles from their policy, he said.
Both states passed the bills last year, along with Rhode Island requiring RTA as a mandatory provision in policies sold in their states. Representatives who were at the forefront of lobbying for the bills discussed their journey during a CIC meeting in November.
Illinois and New Jersey have also filed appraisal bills.
“I think it becomes really important that part of that regulatory process needs to keep a keen eye those things that are being removed and maybe not actively disclosed,” Schulenburg said.
Schulenburg noted that the industry is also seeing insurance companies rolling back how they pay labor rates.
“Two years they added language in their policy that said they can determine rates on whatever [the insurance company] deems is reasonable,” Schulenburg said. “That is interesting when you have small businesses facing lots of inflation and lots of increased costs and now all of a sudden [a carrier] coming back and their customers who are being told we are paying less than we did last year for the same damage or more.”
Heller noted that it’s ironic that, in the past, the insurance industry highlighted the appraisal process as a way to avoid litigation.
“As the appraisal found out that the insurance companies were often low-balling the claims and being told, ‘No, you owe more,’” Heller said. “The insurance industry decided maybe we don’t like this so much.”
He reiterated that states that invest more resources into regulatory oversight on insurance have a more stable pricing environment.
“Because one of the problems that we see in less regulated states, insurance companies will come in and try to grab up market share with these low prices, and then they will feel the bite of claims, and that’s when they will start doing things like negotiating downward with repair shops and removing protections for consumers,” Heller said. “My experience is from the late 90s, when I started looking at this. Having a stable regulatory environment is much better than this sort of wild west approach that we see in some states. The insurance companies go up and down, they chase money when they want to invest, when investment times are good, but when the federal funds rate is really low, and there’s not much to do with your money on hand than they don’t want as much business, so they jack up rates again.”
Consumers can’t handle the volatility as easily as the companies can, he said.
A recent Insurify report found that insurance dropped 6% nationally in 2025. The decrease follows the average cost of insurance rising 46% since 2022 to 2024, it says.
Thirty-nine states saw their prices fall, including eight states with decreases of 15% or more, the report says.
However, not every state saw a decline. Four states had double-digit cost increases in 2025, including New Jersey, where rates increased by an average of 20%. Others that saw large increases include D.C. (18%), Rhode Island (13%), and Michigan (12%).
Insurance companies used the elevated premiums to improve their financial footing, helping the industry absorb tariff-driven costs without raising prices, according to the report. Yet, the report notes that the full effects of tariffs have not hit repair costs.
“Now, many insurers are cutting rates to attract and retain new customers,” the report says.
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Featured image: Aaron Schulenburg, Society of Collision Repair Specialists’ executive director, Doug Heller, Consumer Federation of America director of insurance and Andy Polacek, Federal Reserve Bank of Chicago policy advisor and head of the Insurance Iniative Group during an Automotive Insights Symposium Conference Feb. 4, 2026.
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