AppId is over the quota
Many indicators that analysts typically use to forecast premiums have been in flux. Highway miles driven nationally have risenbut not as much as last year, and the millions of unemployed drivers are using their cars less than ever. The number of fatal accidents has steadily fallen, but the cost of medical care and car repairs has risen. Auto insurance-related fraud has made a comeback, but tort reform in some states has reduced the number of legal settlements stemming from accidents.
“There isn’t a nice clean trend,” said Brian Sullivan, editor of the Auto Insurance Report newsletter. “Instead, you have a churning sea,and companies have no idea what to do with it.”
Statistics on premiums are slow to be collected, which makes forecasting difficult. Through 2009, the average amount that families spent on auto insurance fell for five consecutive years, but rates in some parts of the country started to inch up in 2010.
Given the likelihood that rates will rise furtherin some regions, analysts say consumers should review policies to seek ways to offset any increases. A recent survey by Consumer Reports, for example, indicated that 14 percent of subscribers would have saved money if they had switched insurers.
But experiences vary widely. Unlike, say, the price of new cars, insurance premiums are based largely on the driving habits, financial wherewithal and the value of the car. States also regulate premiums, so rates differ widely among and within states. Drivers who live in areas where the car theft rate is high are likely to pay more than those who live in safer neighborhoods.
Kirstie Hague, who moderates forums at Edmunds.com, said that drivers who post online comments about their auto insurance premiums tend to say they are paying more for insurance these days, though a handful also say they have received deep discounts of late. Some drivers also complain that their rates went up with no warning or explanation from insurers.Though she considers the $85 a month she pays to insure her 2003 Infiniti G35 expensive, Ms. Hague has stuck with State Farm because she likes how the company has handled her claims.
“I’ve had this agent for 20 years,and I’m comfortable with him,” she said.
Her experience is not unusual. Ac- cording to Jeremy Bowler, an analyst at J. D. Power & Associates, 9 out of 10 customers renew their existing policies. Many consumers, he said, are willing to pay more for their coverage if they believe they are getting adequate service. Still, the economic downturn has had a notable impact on drivers, especially those who have lost jobs, said Robert P. Hartwig, president and chief economist of the Insurance Information Institute.
“The frequency of accidents has also fallen because people cut down on vacations, going out less to the mall and commuting less,” Mr. Hartwig said. Of course, “as soon as the economy recovers, people will get back in their cars.”
Still, consumers who are driving less can inquire about discounts, and they can ask about technology that lets in- surers monitor the miles they drive, a pay-as-you go insurance plan offered by Progressiveand other insurers.
Drivers are holding onto cars longer, and older cars cost less to insure. Over the last year, the average age of cars on the road rose by 4.5 months, to 64 months, according to R.L. Polk & Com- pany, which compiles automotive data.
Some drivers drop collision coverage because the cost of fixing old cars often exceeds their value. John Swigart, chief marketing officer of eSurance, said that since the economic downturn,the number of policyholders who carried only liability coverage had jumped 10 percent. “You can chop off 30 to 40 percent of your premiums by not covering your car when it gets damaged,” he said.
In addition to the growing number of older cars on the road, the percentage of uninsured drivers rose to 18.1 percent in 2009, from 17.4 percent a year earlier, according to CNW Research. The economy is a big reason: a percentage point increase in the unemployment rate leads to a rise of 0.75 percentage point in the number of uninsured drivers, said Michael McShane, a risk management professor at Old Dominion University.
The rise in the number of uninsured drivers has prompted more consumers to buy uninsured or underinsured mo- torist insurance, which covers medical costs and car repairs if the policyholder is struck by someone without coverage.
Another result of the economic downturn, analysts say, is that companies are increasingly using so-called insurance credit scores to help them determine a driver’s potential risk. These scores are determined using a blend of more than two dozen indicators, including financial credit scores — and for many people, these have dropped.
“Credit scores are a very large part of how they determine your credit-based insurance score and your rates,” said Jeff Blyskal, a senior editor at Consumer Reports, who said consumers should ask to be rescored by their insurers every year. “You’re talking about thousands of dollars of difference from the top to the bottom.”
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