Auto Insurance Rates Take Dip in 2005, Safer Vehicles Cited

Washington DC June 20, 2005; The AIADA newsletter reported that auto insurance policyholders are benefiting this year thanks to a steady decrease in the number of automobile accidents on U.S. roads and highways, “savvier risk-management techniques,” and “simmering competition,” reported The Associated Press. “

The market for auto insurance is becoming very competitive,” said Robert Hartwig, chief economist at the Insurance Information Institute. “Millions of consumers are likely to see a decrease this year.”

Despite the fact that the Institute expects spending to increase nationally at an average of 1.5 percent to $870 per vehicle, many drivers will be getting a break. For example: “In New York, 10 big auto insurers -- including market leaders AllState, GEICO Corp. and State Farm Insurance Co. -- have cut rates an average of 5 to 6 percent this year, saving New York drivers nearly $350 million.

State Farm, the nation’s largest auto insurance underwriter with about 19 percent market share, says it has dropped prices in 32 states this year while raising them in just one: North Dakota.” III’s Hartwig contends, “We’re seeing a more prudent form of competition that is allowing insurers to lower premiums while remaining profitable.”

An important factor in that prudence is the growth of sophisticated pricing models. Insurers are spending millions on technology that allows them to crunch underwriting data to more accurately match price to a driver’s risk. The result: They’re able to cut prices with a scalpel instead of a butcher’s knife, offering hundreds or even thousands of price points based on drivers’ potential risk, instead of lumping them into a few broad categories.”

The Institute says safer vehicles have led to a drop in accidents, which also benefits policyholders. “The number of vehicle crashes resulting in injuries dropped 14 percent between 1996 and 2003 -- from 2.2 million to 1.9 million -- even though there are more cars on the road and the total number of miles driven is up,” reports AP. “The trend allows insurers to pay out a smaller percentage of each premium dollar in claims and expenses -- now down to 93 cents -- and insurers are passing along some of those savings to policyholders.”