Auto claims inflation: What business leaders need to know

The cost of auto insurance claims has climbed sharply since 2020, and the trajectory shows no sign of flattening. According to the LexisNexis 2025 U.S. Auto Insurance Trends Report, bodily injury and property damage severity have increased by 35% since 2019. For auto equipment manufacturers, this is not just an insurance industry problem. It is a brand problem, a customer retention problem and an untapped revenue opportunity.

The same forces driving this inflation, including advanced driver assistance systems (ADAS), increasingly complex vehicle architecture and supply chain challenges position OEMs to become indispensable partners in how vehicles are insured and repaired. The question is whether manufacturers will lead that conversation or react to it.

The cost curve: Why auto claims inflation persists

Claims severity, the average dollar amount insurers pay per claim, has outpaced general inflation for five consecutive years. CCC's Q2 2025 Crash Course report found that auto medical billing inflation consistently exceeds the Consumer Price Index for health care, with third-party bill line severity increasing 8.9% since Q1 2024. Vehicles are more expensive to repair, labor rates at body shops continue to rise and replacement parts carry longer lead times compared to pre-pandemic era disruptions.

ADAS and advanced vehicle technology: The new repair reality

Advanced safety technologies are changing what it means to repair a vehicle. Cameras, radar and lidar sensors require precise recalibration after even minor incidents, not just cosmetic fixes. A windshield replacement on a vehicle with forward-facing cameras, for example, can add hours of labor and specialized equipment costs to what was once a routine repair.

For OEMs, this makes the right insurance coverage more important than ever. The right insurance options are part of the ownership experience they've promised their customers, but incomplete coverage will leave a bad taste in buyers' mouths.

Supply chain pressures: Tariffs, parts and labor

Ongoing pressures continue to keep parts costs elevated and repair times extended. Tariffs on imported steel, aluminum and finished components add meaningfully to repair costs. Parts availability remains uneven, with collision-specific components often deprioritized compared to warranty repairs. Labor scarcity compounds the problem. The collision repair workforce is aging, and technical schools have not kept pace with demand for certified technicians. Manufacturers who can guarantee parts supply and invest in technician training create differentiation that benefits both repair quality and insurers' ability to control costs while maintaining quality outcomes.

Insurance partnership models that work

Embedded insurance programs let customers purchase coverage at any point in their journey—shopping, buying or owning. Whether bundled with financing or added later, this model benefits everyone: OEMs earn a share, insurance companies gain distribution and customers enjoy a seamless experience. Partnering with an omnichannel brokerage like VIU by HUB goes further by offering both digital and personal service options, along with the neutrality and choice that come with working with an independent broker.

Certified repair network access

As a broker, VIU by HUB offers customers access to insurance companies that include genuine parts coverage, if the customer chooses that option. This gives vehicle owners the flexibility to select policies that route repairs to OEM-certified facilities where trained technicians use manufacturer-approved parts. OEMs benefit from parts revenue and quality assurance, while customers benefit from knowing their vehicle is repaired to manufacturer specifications.

Connected vehicle capabilities

Connected vehicle capabilities enable enhanced customer experiences, from crash assistance to simplified claims processes, strengthening the value of insurance integrated into your ecosystem.

Affinity programs and brokerage as a service

Affinity programs offer a lighter-touch entry point for OEMs not ready to take on underwriting complexity. By endorsing a preferred insurance partner, OEMs provide value to customers without managing insurance operations directly. Taking it a step further, brokerage as a service allows insurance to be added as an extension of the OEM brand, leveraging the trust customers already place in the manufacturer while fully integrating the insurance experience into the ownership journey.

The right model depends on brand positioning, risk appetite and technical capabilities. Most OEMs begin with affinity or certified repair agreements and graduate to embedded or data partnerships as infrastructure matures.

Customer experience and brand loyalty

Insurance touches customers at their most vulnerable moments. The experience they have during claims directly shapes how they feel about the brand behind the vehicle.

When repairs drag on because parts are backordered, customers blame the manufacturer. When premiums spike because carriers cannot assess ADAS costs, customers question the technology. Conversely, a seamless claims experience reinforces the purchase decision and drives repurchase intent that no advertising budget can replicate.

Strategic imperatives for the year ahead

The forces driving auto claims inflation are structural, not cyclical. OEMs that treat insurance as someone else's problem will cede margin, customer relationships and brand equity to competitors who engage.

• Build or strengthen certified repair networks – Make sure your network has the tooling, training and parts access to handle ADAS and advanced vehicle repairs at scale.
• Explore insurance partnerships that fit your brand – Identify models that align with your customer experience goals and revenue ambitions, then start with pilot programs and iterate.
• Invest in technician training and parts availability – These operational investments pay dividends in repair quality, customer satisfaction and insurance economics.

The OEMs that act now will shape how the industry insures and repairs vehicles for the next decade. Those that wait will spend that decade reacting to rules written by someone else.

Frequently asked questions about auto claims inflation

How does ADAS calibration affect insurance claims costs?

ADAS sensors require precise recalibration after many repairs, adding meaningfully to per-claim costs depending on the sensor suite. This is why insurance companies are eager to partner with OEMs who can standardize calibration processes.

What is embedded insurance and why should OEMs consider it?

Embedded insurance integrates coverage into the vehicle purchase experience. For OEMs, it creates a new revenue stream and deepens customer relationships by making insurance a seamless part of the ownership experience.

How do tariffs affect repair costs for manufacturers?

Tariffs on imported materials and finished parts increase landed costs, which extend to insurance claims when vehicles need collision repair. OEMs with diversified supply chains are better positioned to manage this volatility.

What role does telematics data play in insurance partnerships?

Connected vehicle data enables features like usage-based pricing, real-time crash detection and automated claims initiation. For customers, this means more control over their insurance experience, drivers who demonstrate safe habits can benefit from personalized pricing, while crash detection can streamline the claims process when they need it most.

Our strategic partnerships team can help you evaluate insurance partnership opportunities and find models that align with your business objectives. Get started today.