For many drivers, trying to figure out where auto insurance premiums are headed is like trying to catch butterflies: Just when you get close, they fly off in another direction. Many indicators that analysts typically use to forecast premiums have been in flux. Highway miles driven nationally have risen but not as much as they did in 2009, and the millions of unemployed drivers are using their cars less than ever.
The number of fatal accidents has steadily fallen, but the costs of medical care and car repairs have 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 an industry 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 further in 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, auto insurance premiums are based largely on 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, although a handful also say they have received deep discounts of late.
Some also say their rates went up with no warning or explanation from insurers. Ms. Hague said that although she considers the $85 a month she pays to insure her 2003 Infiniti G35 expensive, she has stuck with State Farm because she likes the way the company has handled her claims. "I've had this agent for 20 years, and I'm comfortable with him," she said. According to Jeremy Bowler, an analyst at J.D. Power & Associates, 90 percent of customers renew their existing policies.
Many, he said, are willing to pay more for 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, he added, "as soon as the economy recovers, people will get back in their cars." 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 & Co., which compiles automotive statistics. 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. Michael McShane, a risk management professor at Old Dominion University, said a percentage-point increase in the unemployment rate leads to a rise of 0.75 percentage point in the number of uninsured drivers. That increase has prompted more consumers to buy coverage for 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 increasingly are using so-called insurance credit scores to help them determine potential risk. These scores use a blend of more than two dozen indicators, including financial credit scores, which, for many people, 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 their insurers for a rescoring every year. "You're talking about thousands of dollars of difference from the top to the bottom."
