May CPI rose 4.2% year over year, with vehicle repair and used car prices climbing, pressuring insurers’ profitability.
U.S. inflation reached 4.2% in May, the highest in three years, driven partly by elevated vehicle repair costs and used car prices. Repair and maintenance expenses surged 6.1% year over year, while used vehicle prices rebounded after months of declines.
Auto insurers like Progressive (PGR) and Allstate (ALL) previously raised premiums to offset inflation-driven claim costs during 2021-2023. Progressive reported a combined ratio of 86.4% in Q1 2026 and 90.2% in April, indicating underwriting profitability. Policies in force grew 8% year over year to 39.8 million by April’s end.
Persistent inflation in key cost categories may force insurers to adjust pricing strategies further to maintain margins.