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In 2010, Eric DuBarry and his two-year-old son Seamus were crossing a street in Portland, Oregon, when an elderly driver mistook the accelerator for the brake, and ploughed into the pair and another man. They were flung across the street—the pram wrapping itself around a lamppost. In hospital that evening, Michelle DuBarry, Seamus’s mother, recalls “this realisation of, my God, how are we going to pay for this?” The day after the crash, Seamus died. The hospital charged the couple’s insurance $180,000 for his care. The DuBarrys had to raise $4,500 of that themselves; and had no coverage for the time off work they had to take. Ms DuBarry thought that at least the driver’s car insurance would pay for some of those costs.
She quickly discovered that there was little hope of that. The driver who killed Seamus had just $100,000 of liability coverage per victim. Before the DuBarrys saw a penny, their health and car insurers claimed the entire amount to cover their costs. Eventually, with the help of a lawyer, they clawed some back. But, says Ms DuBarry, “I still was just left with this feeling: How can it be this hard?”
She began campaigning for a change in the law in Oregon which had allowed hospitals and insurers to get the first bite of any settlement—and succeeded. Yet the real problem, she points out, was the low level of liability coverage. “In Oregon, the minimum amount of insurance you’re required to have is $25,000,” she says. “Even if you’re just admitted to the ER, there’s not going to be money left over.”
Car insurance in America is getting far more expensive. In the year to December 2023, prices paid for it, as measured by the consumer-price index, rose by 20%, even as inflation overall moderated. Prices are often controlled at state level, but regulators are approving the increases because the industry is losing money hand over fist. According to the American Property Casualty Insurance Association (APCIA), a trade association, last year insurers paid out $1.08 in claims for every $1 in premiums they took in.
And yet what Ms DuBarry’s story shows is that, in fact, American car insurance is still far too cheap. As much as drivers may resent paying higher premiums, insurance covers only a small fraction of the costs inflicted in car crashes. Instead, health insurers, government and drivers involved in crashes shoulder the burden, and victims are rarely fully compensated.
According to a study published last year by the NHTSA, America’s highway-safety regulator, the direct economic costs of car crashes in 2019 was $340bn, or about 1.6% of GDP. Yet the NHTSA says insurance—and not just car insurance—covered just 54% of that. The agency put the true social cost, including lost life years, at nearly $1.4trn. In 2019, 9m people were involved in serious car crashes; around 4.5m people suffered injuries and 36,000 were killed.
Since then, the number of severe crashes has climbed. It is hard to say exactly why. New, heavier sports utility vehicles and pick-up trucks seem to be deadlier. Since the pandemic, traffic has spread out more evenly through the day, and so speeds have increased. Insurers also point to more people driving while looking at their phones. Whatever the cause of the spike, in 2022 nearly 43,000 people were killed in car crashes, including 7,500 pedestrians—the highest figure since 1981.
America’s spartan car insurance stands out in the rich world. Legal minimum bodily-injury coverage varies state by state, but nowhere does it pass $100,000 per accident. According to the Insurance Research Council (IRC), an industry data group, 29% of claims nationally (and over 50% in several states) involve people insured at the state minimums. Few policies go beyond a few hundred thousand dollars of liability. The cost of a serious crash “is never going to be covered by that”, says Dale Porfilio, of the IRC. By contrast, in Germany drivers are required to have €7.5m ($8.2m) of bodily-injury coverage, and in Britain liability is unlimited. And in those countries, going into hospital does not mean running up a life-altering bill.
Hardly by accident
Why not raise the liability legal limits? The problem, points out Robert Gordon, a vice-president at the APCIA, is that it would make insurance cost more. And that is deeply unpopular.
In October California raised its minimum limits for bodily-injury coverage—but to just $30,000 per victim. A few states are going in the other direction. Michigan, where car insurance is “no fault”, which means that victims claim from their own policies regardless of whose fault the crash was, in 2019 removed a requirement for people to buy coverage for unlimited medical costs. That led to a big drop in premiums, defying the national trend (previously Michigan drivers had higher bills than most). Gretchen Whitmer, the state’s Democratic governor, considers that to be a victory for consumers.
Cheaper premiums do not mean that the costs go away. Indeed, as prices rise nationally, in part because of the greater number of crashes, some worry that more drivers will forsake buying insurance altogether. Already around one in eight American drivers is not covered, a far higher share than in other rich countries. David Abels, a personal-injury lawyer in Illinois, says that “in reality, you have to protect yourself.” Drivers are subsidised, and society at large pays the bill. ■
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Andersen Ross Photography Inc | Digitalvision | Getty Images
Wall Street is warning that the U.S. Department of Education’s crack down on student loan repayments may take billions of dollars out of consumers’ pockets and hit low income Americans particularly hard.
The department has restarted collections on defaulted student loans under President Donald Trump this month. For first time in around five years, borrowers who haven’t kept up with their bills could see their wages taken or face other punishments.
Using a range of interest rates and lengths of repayment plans, JPMorgan estimated that disposable personal income could be collectively cut by between $3.1 billion and $8.5 billion every month due to collections, according to Murat Tasci, senior U.S. economist at the bank and a Cleveland Federal Reserve alum.
If that all surfaced in one quarter, collections on defaulted and seriously delinquent loans alone would slash between 0.7% and 1.8% from disposable personal income year-over-year, he said.
This policy change may strain consumers who are already stressed out by Trump’s tariff plan and high prices from years of runaway inflation. These factors can help explain why closely followed consumer sentiment data compiled by the University of Michigan has been hitting some of its lowest levels in its seven-decade history in the past two months.
“You have a number of these pressure points rising,” said Jeffrey Roach, chief economist at LPL Financial. “Perhaps in aggregate, it’s enough to quash some of these spending numbers.”
Bank of America said this push to collect could particularly weigh on groups that are on more precarious financial footing. “We believe resumption of student loan payments will have knock-on effects on broader consumer finances, most especially for the subprime consumer segment,” Bank of America analyst Mihir Bhatia wrote to clients.
Economic impact
Student loans account for just 9% of all outstanding consumer debt, according to Bank of America. But when excluding mortgages, that share shoots up to 30%.
Total outstanding student loan debt sat at $1.6 trillion at the end of March, an increase of half a trillion dollars in the last decade.
The New York Fed estimates that nearly one of every four borrowers required to make payments are currently behind. When the federal government began reporting loans as delinquent in the first quarter of this year, the share of debt holders in this boat jumped up to 8% from around 0.5% in the prior three-month period.
To be sure, delinquency is not the same thing as default. Delinquency refers to any loan with a past-due payment, while defaulting is more specific and tied to not making a delayed payment with a period of time set by the provider. The latter is considered more serious and carries consequences such as wage garnishment. If seriously delinquent borrowers also defaulted, JPMorgan projected that almost 25% of all student loans would be in the latter category.
JPMorgan’s Tasci pointed out that not all borrowers have wages or Social Security earnings to take, which can mitigate the firm’s total estimates. Some borrowers may resume payments with collections beginning, though Tasci noted that would likely also eat into discretionary spending.
Trump’s promise to reduce taxes on overtime and tips, if successful, could also help erase some effects of wage garnishment on poorer Americans.
Still, the expected hit to discretionary income is worrisome as Wall Street wonders if the economy can skirt a recession. Much hope has been placed on the ability of consumers to keep spending even if higher tariffs push product prices higher or if the labor market weakens.
LPL’s Roach sees this as less of an issue. He said the postpandemic economy has largely been propped up by high-income earners, who have done the bulk of the spending. This means the tide-change for student loan holders may not hurt the macroeconomic picture too much, he said.
“It’s hard to say if there’s a consensus view on this yet,” Roach said. “But I would say the student loan story is not as important as perhaps some of the other stories, just because those who hold student loans are not necessarily the drivers of the overall economy.”
A woman walks in an aisle of a Walmart supermarket in Houston, Texas, on May 15, 2025.
Ronaldo Schemidt | Afp | Getty Images
U.S. consumers are becoming increasingly worried that tariffs will lead to higher inflation, according to a University of Michigan survey released Friday.
The index of consumer sentiment dropped to 50.8, down from 52.2 in April, in the preliminary reading for May. That is the second-lowest reading on record, behind June 2022.
The outlook for price changes also moved in the wrong direction. Year-ahead inflation expectations rose to 7.3% from 6.5% last month, while long-term inflation expectations ticked up to 4.6% from 4.4%.
However, the majority of the survey was completed before the U.S. and China announced a 90-day pause on most tariffs between the two countries. The trade situation appears to be a key factor weighing on consumer sentiment.
“Tariffs were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April; uncertainty over trade policy continues to dominate consumers’ thinking about the economy,” Surveys of Consumers director Joanne Hsu said in the release.
Inflation expectations are closely watched by investors and policymakers. Federal Reserve Chair Jerome Powell has said the central bank wants to make sure long-term inflation expectations do not rise because of tariffs before resuming rate cuts.
A final consumer sentiment index for the month is slated to be released on May 30, and will likely be closely watched to see if the tariff pause led to an improvement in sentiment.
This is breaking news. Please refresh for updates.
Jamie Dimon, chief executive officer of JPMorgan Chase & Co., speaks during the 2025 National Retirement Summit in Washington, DC, US, on Wednesday, March 12, 2025.
Al Drago | Bloomberg | Getty Images
Wall Street titan Jamie Dimon said Thursday that a recession is still a serious possibility for the United States, even after the recent rollback of tariffs on China.
“If there’s a recession, I don’t know how big it will be or how long it will last. Hopefully we’ll avoid it, but I wouldn’t take it off the table at this point,” the JPMorgan Chase CEO said in an interview with Bloomberg Television.
Specifically, Dimon said he would defer to his bank’s economists, who put recession odds at close to a toss-up. Michael Feroli, the firm’s chief U.S. economist, said in a note to clients on Tuesday that the recession outlook is “still elevated, but now below 50%.”
Dimon’s comments come less than a week after the U.S. and China announced that they were sharply reducing tariffs on one another for 90 days. The U.S. has also implemented a 90-day pause for many tariffs on other nations.
Thursday’s comments mark a change for Dimon, who said last month before the China truce that a recession was likely.
He also said there is still “uncertainty” on the tariff front but the pauses are a positive for the economy and market.
“I think the right thing to do is to back off some of that stuff and engage in conversation,” Dimon said.
However, even with the tariff pauses, the import taxes on goods entering the United States are now sharply higher than they were last year and could cause economic damage, according to Dimon.
“Even at this level, you see people holding back on investment and thinking through what they want to do,” Dimon said.
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