Expected auto tariffs forces state to grapple with higher insurance rates

NINA MOINI: Well, this week, President Donald Trump has vowed to put new tariffs on a variety of goods from other countries. That includes a 25% tariff on imported cars and car parts that's set to begin on Thursday. Tariffs are taxes that companies pay to bring goods into this country. And industry experts say, the higher costs will flow to consumers, as higher prices, not just for new goods, but for repairs and insurance too. Aaron Cocking is President and CEO of the Insurance Federation of Minnesota. He talked with All Things Considered host, Tom Crann.

AARON COCKING: The money that insurers collect in the form of premium is what's used to pay losses. And when the cost of these losses go up, for example, by the adding of tariffs to lumber or to vehicle parts, insurers have to price that into what they charge consumers for their insurance.

NINA MOINI: So that was the CEO, again, of the Insurance Federation of Minnesota, talking to our Tom Crann. And joining me now for more perspective on this, from the state's perspective, is Minnesota Department of Commerce Deputy Commissioner of Insurance Julia Dreier. Thank you so much for being with us, Commissioner-- or Deputy Commissioner. My apologies.

JULIA DREIER: No worries. Thanks, Nina. Thanks for having me.

NINA MOINI: Yeah, I was chuckling about being the Deputy Commissioner of Insurance. I think that's why-- it's a fun title. I don't what people think that you do, necessarily, but can you tell us a little bit about what you do do?

JULIA DREIER: Sure, absolutely. So I am the Deputy Commissioner of Insurance. I oversee the Insurance Division here at the Department of Commerce in the state. So we are responsible for the licensing of insurance companies, but also looking at the rates that insurance companies need to charge.

NINA MOINI: And so we just heard that clip from the President of the Insurance Federation of Minnesota. Was that in line with what you are hearing? What are some of the different stakeholders communicating to you?

JULIA DREIER: Yeah, absolutely. As you've noted, the Trump administration has announced new tariffs on imported vehicles and auto parts that are going into effect this week. And that also impacts new cars and trucks and SUVs, but it also impacts the cost to build and repair those vehicles. So I think it's really easy to think about those tariffs only impacting those who are buying a new car. But here at Commerce, we also recognize that the tariffs could have a cost on maintaining and insuring your car. So it's going to make it more expensive for Minnesotans to get to work, take their kids to childcare, and drive across the state for vacation, simply because of insurance costs.

NINA MOINI: And so if we set the stage, the online insurance platform Insurify released a report, it looks like last year, that said, car insurance rates in Minnesota went up by 58% between 2023 and 2024. I don't know if that's in line with what the state has been tracking. And that was the largest increase of any state. Does that match what you're seeing? And if so, is this particularly concerning for Minnesotans?

JULIA DREIER: Yeah, absolutely. We know auto insurance costs have been on the rise. And the past five years, in particular, have been incredibly challenging for a handful of reasons, one, inflation. Everything's already more expensive. Car parts are more expensive. It costs more money to pay the people who are building and repairing your cars.

Second, technology changes, so cars are just more complicated now. So if you need a bumper replaced, it's not just a piece of metal or plastic. There may be cameras or sensors in it. We also see supply chain issues, just human behavior in terms of reckless driving and hailstorms, climate change. All of those have been contributing to increased costs. The tariffs are on top of these changes. And can't control the weather, the hailstorms. But these tariffs are simply a man-made crisis, adding costs.

NINA MOINI: And some people might hear this and wonder, do insurers really need to do that? Or are they using tariffs as an excuse to raise prices? How dire is the situation?

JULIA DREIER: Yeah. Insurance loves predictability. And these tariffs have been anything but predictable. So one of the things we look at here at Commerce is really making sure that the assumptions that insurance companies are using are making sense. We're trying to make sure they're not charging too much because of economic factors like tariffs. But at the end of the day, the tariffs increase costs. And we need insurance companies to stay in business. And part of that means it's more expensive for them to run their business and to pay insurance claims. So we do see premiums going up because of it.

NINA MOINI: President Trump has said that the auto tariffs are going to make the US car industry stronger by boosting domestic manufacturing, and then people will buy more domestic vehicles. What do you think about that? Are there benefits that you can see reaching Minnesotans, especially in the long term?

JULIA DREIER: I think it's not just about buying a new car. But it's also, a lot of people don't buy a new car every year or every six months. It's also just more expensive to fix a car. These tariffs obviously impact auto parts. So if you're in an accident, or if you're someone like me and drive an older car, it's just going to be more expensive to simply fix your car or keep it running.

NINA MOINI: Is there anything the state can do at the state level to try to soften the blow? Are there consumer protections? Are there laws that could be on the books? What options is the state looking at?

JULIA DREIER: Yeah, that's a good question. I think there are a couple of things. One, I think it's important to remember, and I think it's really common to think that we have the ability to deny insurance companies' proposed rate increases. But again, what we really do is look at the underlying assumptions and making sure they're not charging too much.

And part of our job, too, is to make sure that there are still companies there to provide business to people and to offer insurance. And I think that's one of the great things about Minnesota's market. We do have a very competitive market still. And we really encourage people to continue to go and shop for coverage, make sure they're reviewing their policies to know what's covered, what's not covered, see if they can get a better deal. And certainly if they have concerns, we would encourage them to call the Department of Commerce. And we can certainly look into their issue.

NINA MOINI: And I also, while I have you, I want to talk about Minnesota's uninsured drivers in the state. We had found a report from Bankrate and an estimate that there are more than 350,000 uninsured drivers in Minnesota. What do you say to people who might be looking at the cost of premiums and hearing this news and think, well, I guess I'll take my chances?

JULIA DREIER: Yeah, it's a hard conundrum. I recognize that increased premium costs are expensive. And it's one of many expenses that Minnesotans are facing. The cost of uninsured drivers also increases premium costs for people. Again, I would really encourage people to certainly review their policy to shop around and see if they can find a better coverage and talk to agents, see if you need help in that sense. But again, I would really encourage people to maintain their coverage.

NINA MOINI: And then while I have you, Deputy Commissioner, are there other types of insurance where you're seeing these types of trends? You mentioned the last five years and the pandemic and everything that everybody's been through. How are insurance rates doing generally from your perspective?

JULIA DREIER: It's certainly been a challenging couple of years for a lot of people in the insurance industry. But again, what we're really concerned about right now is the tariffs and the fact that these are tariffs that are something that we-- it's a crisis that's created. Again, we can't control the weather or how many storms we have. We can't necessarily control all of those things. But the tariffs are really what our concern is right now.

NINA MOINI: And so will your department be sending any letters or any suggestions to the White House? Or are you really just left to stand by?

JULIA DREIER: Again, I think a lot of this is really about making sure that people are aware that this is an issue and are aware that costs are going to go up because of this and try to plan accordingly. We can all play our part. But again, we're really focused on what we can do here at Commerce and what individual Minnesotans can do in response to this.

NINA MOINI: Deputy Commissioner Dreier, thank you so much for stopping by. I really appreciate your time.

JULIA DREIER: Thank you so much.

NINA MOINI: That's Julia Dreier, Deputy Commissioner of Insurance for the Minnesota Department of Commerce.