Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating Car Insurance Premiums
Transcript
- Lucas: If you own a car and you've opened your renewal notice lately, you might have done a double take—not because the premium went up another 20 percent, but because it barely budged. Luna: Yeah, that tracks. I just got my six-month renewal from GEICO and it was up maybe three percent. I literally called to make sure there wasn't a mistake. Lucas: Right, and that's a big shift. For most of 2024 and into 2025, car insurance premiums were running hot—north of 20 percent year-over-year increases, according to CPI data. It was one of the most painful line items in the household budget. Luna: So what changed? Did insurers suddenly get nice? Lucas: Not exactly. A few things. First, the post-pandemic accident surge is finally leveling off. Fewer miles driven during lockdown meant fewer claims, but when everyone got back on the road in 2022 and 2023, accident frequency spiked. Now that's normalizing. Luna: And insurers raised rates aggressively during that period to catch up. They probably overshot. Lucas: Exactly. Their loss ratios—what they pay out in claims versus what they collect in premiums—have improved. So they don't need to jack up rates as much. Plus, state regulators have been pushing back on proposed increases in places like California and Florida. Luna: So the relief is real. How much of a difference is it making for the typical worker? Lucas: Let's put it in wage terms. Average hourly earnings for private workers hit $37.50 in May, up from $37.41 in April. That's about a 2.4 percent annualized increase over the month. So if your insurance premium is only going up three percent instead of twenty percent, that raise actually sticks. Luna: It's like the money that used to get eaten by the premium increase is now staying in your pocket. Lucas: Exactly. And when you look at the broader cost picture, core CPI—that's excluding food and energy—was at 336.1 in May, up from 335.42. That's about a 2.5 percent annualized rate. So wages are keeping pace with core inflation, and with car insurance cooling, one of the sticky services is no longer dragging down real purchasing power. Luna: But not every state is seeing the same slowdown, right? I heard that in some states premiums are still climbing. Lucas: True. It's uneven. States with higher litigation costs or more severe weather claims—like Florida and Louisiana—are still seeing bigger increases. But nationally, the trend is clearly moderating. The Bureau of Labor Statistics' CPI for motor vehicle insurance showed the smallest year-over-year increase in two years as of April. Luna: So for the average listener, the takeaway is: if you haven't shopped around for car insurance in a while, now might be a good time, because the competitive landscape is shifting. Lucas: Absolutely. And this ties back to something we've talked about on this show before: the mix of what you spend your money on matters. When the things that were spiking—like car insurance—start to stabilize, your raise goes further even if the headline wage number isn't exploding. Luna: You know, it's funny. We spend so much time on this show talking about big macro numbers—CPI, wage growth, the employment cost index. But sometimes the thing that actually lands for people is a specific bill that doesn't hurt as much anymore. Lucas: That's actually a good segue to something I want to mention. This show exists because listeners like you support it. We don't have ads, we don't have sponsors pushing a narrative. A handful of listeners chip in monthly through Buy Me a Coffee dot com slash fexingo, and that's literally what funds making as many of these episodes as we do. Luna: Yeah, and it's genuinely a small group that keeps the lights on. If you've gotten something out of these episodes—maybe it helped you understand your own finances a little better—that link is a way to keep it going. Lucas: No pressure at all. Just, if it's made a difference and you want to be part of why it continues, that's the place. Back to the numbers. Lucas: So where do we think car insurance premiums go from here? My sense is we'll see continued moderation, but not outright deflation. Insurers have rebuilt their reserves, but repair costs are still elevated because of parts and labor shortages. Luna: And new car prices are still high, which means total loss payouts are bigger. Lucas: Right. So the premium growth might settle into a three-to-five percent range, which is basically in line with overall inflation. That's a huge improvement from where we were. Luna: And from a wage perspective, that means workers can actually feel the raise, rather than watching it get absorbed by one bill. Lucas: Exactly. The employment cost index for wages was at 177.5 in early 2026, up from 176.23. That's about a 4.4 percent annualized increase. So wages are still growing faster than the overall CPI and certainly faster than insurance premiums now. Luna: That's a positive real wage story for the first time in a while on this particular expense. Lucas: And it's a reminder that inflation is not a monolith. Different items move at different speeds, and when the ones that were hurting you most start to ease, your financial picture improves even without a giant raise. Luna: Alright, so practical advice: check your renewal, shop around, and if you find a better deal, don't be loyal. The insurers are competing again. Lucas: Good advice. And we'll keep tracking how these pieces fit together. Next episode, we're going to look at something that's still rising fast — rent in certain Sun Belt cities — and whether wage growth is finally catching up there too.