Auto Insurance CPI Falls 5.1% in a Year While Repair Costs Rise 5.2%, and the Gap Is Now Showing in Combined Ratios

Motor vehicle insurance in the Consumer Price Index stood at 848.231 in August 2026, 5.13% below August 2025 and 5.5% below its February 2026 peak, on the CPI release of September 11 (BLS). It was the fourth consecutive negative annual reading since May 2026 ended a run of increases that began in April 2021 and peaked at 22.64% in April 2024. Over the same twelve months the motor vehicle maintenance and repair index rose 5.24%.

Two series that ought to move together have crossed. Auto insurance premiums are priced off repair and medical costs with a lag, and for four years the premium index chased the cost indices upward. Since May it has been falling while the largest physical-damage cost input keeps rising at more than five percent, and the first carrier monthly report to cover August shows the crossing arriving in the loss ratio.

Key Takeaways

-5.13% year over year in August 2026 for CPI motor vehicle insurance, after -2.01% in May, -4.11% in June and -4.46% in July. The last negative reading before May was March 2021, at -2.47%, in the tail of the pandemic rebate period.
+49.8% is the index's rise from August 2021 to August 2026 even after this year's decline. The cumulative repricing of 2022 through 2025 has been given back by roughly one tenth, which is why the decline reads as a correction rather than a reversal.
+5.24% for motor vehicle maintenance and repair in the year to August, against +0.57% for new vehicles and -2.32% for used cars and trucks. Physical damage severity is still inflating; only the premium is not.
Progressive wrote 6% more premium in August on 7% agency and 9% direct auto policy growth, which puts average written premium per policy down about three to four points, and its combined ratio worsened 6.2 points to 89.3 from 83.1 a year earlier.
2.754% is the index's weight in the CPI-U, so a 5.13% decline took about 0.14 points off the 3.4% all-items reading. Auto insurance contributed close to half a point to headline inflation at its 2024 peak; it is now a drag.

What the Index Measures and Where It Turned

BLS prices the premium for a fixed set of policy profiles each month, so it tracks the rate level and not consumer spending or mix. Its path since 2020 has three legs. Pandemic rebates took the index down 14.35% year over year in May 2020. Recovery and the 2022-2024 severity shock took it up in every month from April 2021 to April 2026, with the annual rate above 10% from September 2022 through February 2025 and a peak of 22.64% in April 2024 (BLS series CUUR0000SETE).

A third leg is now underway. Its annual rate slowed from 11.77% in January 2025 to 2.82% in December, hovered near zero through April 2026, and went negative in May at -2.01%. Each month since has been lower, and the index level itself has fallen for six consecutive months from the February 2026 high of 897.406. September's release noted a 0.8% monthly decline after 0.3% in July, the largest one-month drop of the run.

Set the premium series against its inputs and the inversion is plain. Maintenance and repair, the price of the labor and parts a physical-damage claim buys, has run between 5% and 7% year over year all of 2026 and printed 5.24% in August. New vehicle prices are flat. Used vehicle prices, which set total-loss settlements, are 2.32% lower than a year ago, the one input that is helping. Transportation services, the aggregate the insurance index sits inside, rose 2.4% over the year, which means the rest of that basket is still inflating and insurance alone is pulling it down.

CPI-U series, August 2026	12-month change	Relative importance
Motor vehicle insurance	-5.13%	2.754%
Motor vehicle maintenance and repair	+5.24%	1.039%
New vehicles	+0.57%	3.838%
Used cars and trucks	-2.32%	2.759%
Transportation services	+2.4%	6.315%
All items	+3.40%	100%

How a Falling Average Premium Meets a Rising Severity Trend

Progressive's August results, filed September 18, are the first monthly carrier disclosure to cover the month of the CPI print, and they carry the arithmetic (Progressive 8-K, August 2026 results). Net premiums written rose 6% to $7.605 billion. Personal auto policies in force rose 7% in the agency channel to 11.34 million and 9% in the direct channel to 16.88 million. Written premium in the agency business grew 3% and in direct 6%. Divide growth in premium by growth in policies and average written premium per policy is down roughly 3.7% in agency and 2.8% in direct.

Progressive's combined ratio for the month was 89.3 against 83.1 in August 2025, a 6.2-point deterioration that the company's year-to-date figure of 87.2 against 84.6 shows building through the year. Catastrophe losses explain 1.9 points of the August ratio, so most of the movement is in the attritional loss ratio: a lower average premium earning through against a severity trend the repair index puts above 5%. Six points of combined ratio on a book still running under 90 is a margin the company chose to spend on growth, and the CPI series records the same choice made across the industry.

Rate adequacy follows from the lag structure. A rate decrease filed and approved in 2025 earns into the CPI over the following twelve months as policies renew, so the -5.13% August reading is mostly the earned effect of decisions taken when personal auto combined ratios sat in the low 80s. Accident year 2026 is the first to be priced on those decreases in full, against a repair cost trend that did not slow. A pricing actuary's indication built on 2024-2025 experience, when premium ran ahead of severity, carries a trend assumption the 2026 data has already outrun.

The Decline Will Outlast the Decision That Caused It

Here is the complication: the CPI series cannot turn quickly, whatever carriers do now. Policies renew across twelve months, so a rate level set in 2025 is still earning in through mid-2027, and the index will keep printing negative annual comparisons against a 2025 base that was itself still rising in the first half. Even a carrier that stopped cutting in September 2026 would see its earned average premium fall for another three quarters. August's -0.8% monthly change was the largest of the run, and the index level has fallen every month since February.

For the industry that means 2027 rate filings will be argued in front of regulators and the public against a price index that shows insurance getting cheaper, at the same time as the 2026 accident year develops on a severity trend that never fell. When the index was last negative, in early 2021, the reversal that followed took the annual rate from -2.47% to +6.11% within a month as pandemic rebates rolled off the base. Nothing in the current base does that work. Any correction has to come from filings, and filings take a year to earn.

Progressive's August combined ratio is the leading indicator. It covers one month and one carrier, and the year-to-date figure of 87.2 is a number most competitors would take. What it establishes is the direction: the first month in which a 5% lower premium level met a 5% higher cost level produced six points of deterioration at the most disciplined pricer in the segment. Every other carrier in the segment reports in October.

Auto Insurance CPI Falls 5.1% in a Year While Repair Costs Rise 5.2%, and the Gap Is Now Showing in Combined Ratios

Key Takeaways

What the Index Measures and Where It Turned

How a Falling Average Premium Meets a Rising Severity Trend

The Decline Will Outlast the Decision That Caused It

Further Reading

Sources