The typical U.S. driver will pay less for auto insurance in 2007than in 2006, with the average premium expenditure expected to dropby 0.5 percent, according to the Insurance Information Institute(I.I.I.).

But why should adjusters care if the average annual cost forauto insurance premiums nationwide has decreased for the first timesince 1999? Because I.I.I. attributes the reductions to lower claimfrequencies, which have declined by up to five percent in 2006 ascompared to 2005. They also note very modest increases in claimsseverity. According to I.I.I., the average cost per claim,including the price of medical care and property damage, rose by aslittle as two percent in 2006.

In addition to fewer accidents, many industry analysts believethat fraud-fighting successes have contributed to a decrease infalse bodily injury claims. Safer vehicles and roads, as well asgraduated licensing programs for teens, are other factors drivingthe downward trend in auto insurance premium costs, I.I.I. said.The changing demographics of the U.S. population, with millions ofbaby boomers born between 1946 and 1964 now all in what insurerscalculate to be their safest driving years, are suspected ofcontributing to these cost reductions, too.

“The I.I.I. is finding that the nation's overall insurancerating system — how a company assesses the risk a particular driverrepresents — has on the whole become much fairer and more equitablethrough innovations in underwriting technology,” said RobertHartwig, executive vice president and chief economist of the I.I.I.“By looking at a potential policyholder's credit score, inconjunction with criteria such as their driving record and drivinghabits, insurers are able to match with greater precision than everbefore the premium they charge in the context of the potentialclaims they may have to pay a policyholder.”