Donald J. Trump, a former US president and current presidential candidate, promised to lower vehicle insurance costs on Twitter this week. That would be a huge benefit for American drivers, putting a lot of money back in our collective pockets, if it weren’t for one minor drawback. He is unable to do it.
In a tweet on September 17, Trump stated that automotive insurance costs had jumped by 73% and promised to “cut that number in half” if elected. The post did not explain how a sitting President, a small-government Republican, might reduce prices from private corporations.
Trump’s assertion of a 73% increase in insurance rates is accurate when comparing average prices from June 2024 to May 2020. However, his idea that he can do anything about it is more speculative. The federal government can use economic levers, but they are typically broad in scope. Adjusting interest rates, for example, is an indirect procedure, as are rates charged by private firms based on customer risk assessments. That is one area where the federal government has no impact.
Insurance sector analysts are similarly skeptical about Trump’s approach.Insurance Journal interviewed former Insurance Information Institute president Robert Hartwig, who stated:
Returning to Trump’s claim that he can influence auto insurance prices, Hartwig declared, “That’s a lie.”
“Someone should explain to Trump that insurance—and insurance rates—are regulated by the states, not the federal government,” according to Hartwig. “If Trump could wave his hands on Day 1 and cut auto insurance rates by half, no auto insurer in the United States would be able to sell auto insurance. The rationale, of course, is that forcing insurers to sell auto insurance at 50% of the existing price would result in massive losses and the insurer’s eventual insolvency—so they would not sell any at all.”
Insurance is a private industry — regulated, yes, but not one in which prices may be set by fiat. Ray Lehmann, editor-in-chief at the International Center for Law & Economics, expressed optimism about Trump’s words in an interview with Insurance News Net.
According to Lehmann, the federal government has some options available to it. “You could fund the National Highway Traffic Safety Administration to conduct a much more aggressive distracted driving campaign. Inflation is a monetary policy concern, which is handled by the Federal Reserve. And the administration wields some power over the Fed. So, lowering overall inflation would slow the acceleration of claims growth. We’ve probably already pushed inflation down, but it’s likely that it will fall even further in the future.
“So, those are all things that the president or Congress, working together, could do. However, I do not believe it is appropriate to expect you to promise any precise price reductions.
Some of the federal government’s economic controls have a slight impact on the cost of auto insurance. They will not, however, dramatically reduce rates, particularly by a specified percentage. The goal of saving customers money may seem appealing on the campaign trail, but it is the uncommon type of political promise that is completely impossible to fulfill.
Jalopnik reached out to the Trump campaign for more information on the former President’s plans, but we have yet to hear back. If the campaign answers, we will update this piece.