Tariffs, Total Losses, and Tech: What’s Reshaping the Global Auto Insurance Market

The global auto insurance market is undergoing a profound transformation, driven by rising trade barriers, escalating costs, and accelerated technological innovation. Tariffs on vehicles and auto parts are directly inflating repair costs, disrupting supply chains, and increasing claim severity across key regions—from the U.S. and Europe to Asia and Latin America. These forces are placing mounting pressure on insurers, repair shops, OEMs, and fleet operators. 

In the United States, recently enacted and proposed tariffs on parts from China, Mexico, and Canada could drive up personal auto claims costs by $26 to $52 billion annually, according to the American Property Casualty Insurance Association (APCIA). With 60% of replacement parts sourced from these countries, this is triggering immediate premium increases—14% in 2023, 12% in 2024, and projected to rise another 8–19% by 2025. Insurers will face additional losses in 2026, as active policies priced before the tariff announcements come to maturity. 

Global production outlooks are also being revised downward in response to these trade actions. According to S&P Mobility, U.S. tariffs are contributing to a significant decline in light vehicle production across regions—down 944,000 units in North America and 251,000 units in Europe by 2026. Tariffs are expected to remain at 25% through 2026 before declining modestly, with long-term structural impacts already underway. 

Other markets are facing their own headwinds. Germany’s motor insurance premiums surged 23% year-over-year by early 2024, fueled by parts inflation and energy costs. In the UK, nearly 40% of claims have experienced repair delays due to customs-related disruptions post-Brexit. In Latin America, where import duties of 14–20% are common, claims costs spiked up to 19% in 2023, followed by broad premium adjustments. 

These dynamics are also accelerating strategic shifts in market presence. As U.S. access narrows, Chinese automakers—especially in the EV segment—are ramping up exports to Europe, capitalizing on cost advantages and robust domestic supply chains. In 2024, Chinese car exports rose over 10%, with a noticeable shift toward European markets (S&P Global, Al Jazeera). This could reshape local competition, production patterns, and consumer pricing. Solera’s own data reinforces these trends. Our analysis shows average auto claims repair costs have risen approximately 40% since 2021. This increase is primarily due to parts and energy inflation, and the rising technical complexity of modern vehicles. Today’s repairs require more specialized labor and involve more components per claim. The compounding effect of tariffs only adds further cost pressure. 

One of the most critical shifts is the growing rate of total loss declarations. In the U.S., more than 30% of claims are now being written off—often not because of catastrophic damage, but because the cost of parts and labor has pushed repairs past the economic threshold. This means insurers are paying more, repair shops are losing revenue, and policyholders are facing unsatisfying outcomes. 

We see this trend gathering pace in other regions too, particularly in Europe and parts of APAC, as inflation and sourcing volatility extend beyond the U.S. market. 

To counter this, insurers are embracing cost-saving strategies such as repairing instead of replacing, and sourcing green parts from salvage. The ability to execute these strategies at scale is becoming a competitive differentiator. 

Beyond cost, these practices also align with growing regulatory and consumer pressure to improve the sustainability of the claims process. Reducing unnecessary write-offs and extending the lifecycle of vehicle components directly supports CO₂ emissions reduction goals. 

Repair shops with advanced diagnostic tools and AI-driven workflows are gaining more business, while smaller, less digitized workshops are being left behind.

AI is now essential. Our proprietary models use image recognition and object detection to rapidly assess damage, determine total loss thresholds, and guide the repair process in real time—enhancing speed, consistency, and cost control. And beyond claims, Solera AI is also embedded in underwriting, fraud detection, parts sourcing, and customer service. According to Deloitte (2024), 76% of U.S. insurers have adopted generative AI in at least one function. MarketWatch reports that 79% of policyholders are comfortable with AI-led claims processes.  

 OEMs are reconfiguring their global supply chains to increase resilience amid trade uncertainty. Repair shops are evolving their toolkits to deal with ADAS and EV components. And insurers are accelerating their tech adoption to maintain competitiveness in a shifting landscape. 

On the OEM side, several manufacturers are proactively adapting to the trade environment by investing in U.S. vehicle assembly capacity. Hyundai has announced $21 billion in new investments, Stellantis $5 billion, Ford $9.6 billion, Toyota $88 million, and Mercedes will introduce a new vehicle at its Tuscaloosa plant in 2027. Audi is evaluating three U.S. production sites, and GM is also increasing local output. Meanwhile, Audi has halted shipments to the U.S., Stellantis has temporarily paused production in Canada and Mexico, and Subaru is reducing exports to Canada. Jaguar Land Rover notably paused U.S. exports as 30% of its production is U.S.-bound—though it retains several months of inventory.  The bottom line: tariffs have exposed structural vulnerabilities in the auto insurance ecosystem—but they’ve also created space for innovation. Solera is proud to be at the forefront of this transformation, helping the industry navigate change with clarity, precision, and speed.

Solera is uniquely positioned to support this transition. With over 280,000 customers in 120+ countries, our SaaS platform manages the full vehicle lifecycle—from sale and maintenance to claims and resale. We process over 25 billion daily transactions and maintain a dataset covering 1.4 billion vehicles, delivering the asset intelligence needed to stay agile.