The soft insurance market is pleasing inflation watchers but less so to shareholders. Falling car-insurance prices have been helping cool inflation data, and insurers suggest they can keep going in that direction for a while.

Insurance is historically cyclical, featuring “hard” markets of rising premium rates followed by “soft” markets of lower rates eating into profits. Right now, auto insurance is softening. Car insurers are broadly dropping rates to grow after pandemic surges. The July consumer-price index showed motor-vehicle insurance falling 4.5% year-over-year, the fastest drop since 2020, marking the third consecutive month of year-over-year declines—a stark reversal from the double-digit rises seen from 2022 to 2025.

But the Federal Reserve and other inflation watchers question how long this soft market will last. Within the CPI report, rising auto-repair costs suggest rate drops may be short-lived. Motor-vehicle maintenance and repair costs were up 6.6% from a year ago, only a slight slowdown from June’s 7% jump. That rise isn’t a fluke. While some industries anticipate tariff refunds following the Supreme Court’s decision, auto parts remain subject to President Trump’s levies under different authorities. “Section 232 tariffs are weighing on the auto sector with higher motor vehicle parts and equipment prices spilling over into motor vehicle maintenance and repair, so this isn’t likely a one-off,” wrote economists at RBC.