I.I.I. :Auto Insurance Rates To Rise Just 1.5%.
NU Online News Service Feb. 9, 1:41 p.m. EST?Auto insurance rates this year are expected to increase just 1.5 percent, due to less accidents and safer cars, the Insurance Information Institute reported.[@@]
The I.I.I. said it was the smallest rise in five years and that some drivers might actually see a decrease.
According to I.I.I., the average cost for auto insurance nationwide for 2005 is estimated at $870?an increase of $13 per vehicle from last year. The institute said the projected increase represents a continued slowdown from 2004 when auto insurance costs rose by just 2.8 percent.
Robert Hartwig, senior vice president and chief economist of the I.I.I., said, “The price of auto insurance is increasing by little more than one-half the rate of inflation.”
He added that, “Many people who, for example, drive safe cars, have excellent safety records and good credit-based insurance scores may see their rates go down.”
Mr. Hartwig cited a declining number of auto accidents, safer cars, new auto theft technology and fraud-fighting efforts as key factors behind the trend.
However, he said that rising costs for medical care and vehicle repairs and higher jury awards remain a problem, according to the I.I.I. analysis.
“Unfortunately, while drivers today are filing fewer claims, those that are filed cost more,” Mr. Hartwig said. “It costs more to repair cars, particularly following accidents involving sport utility vehicles.”
I.I.I. reported that insurers will pay between $15 billion and $20 billion in medical claims in 2005. Higher costs for hospitalization and pharmaceuticals, and state regulations that permit abuse of medical treatments and associated legal costs are also a factor, according to the institute.
“Collectively, these high costs more than offset the decline in accident frequency, pushing overall rates upward,” Mr. Hartwig commented..
Among the items driving insurance upward, I.I.I. said, are medical costs. I.I.I. noted that each year more than two million car accidents involve injuries. More than one in four auto accidents resulted in injury claims in 2003, according to the Insurance Research Council.
Typical costs for treating an auto accident victim range from $6,000 to $9,000, but can easily run into the tens of thousands of dollars, I.I.I. said.
Higher repair costs, reflecting insurers’ reduced use of generic crash parts, are another significant cost driver today?rising at nearly double the overall rate of inflation, the institute found.
The I.I.I. said larger jury awards in vehicular liability cases continue to put additional upward pressure on auto insurance rates. The average jury award in auto liability cases was $220,680 in 2002, according to the most recent available data from Jury Verdict Research, I.I.I. said.
Mr. Hartwig said, “Auto liability issues are much more important than people realize. About 60 percent of auto premiums paid in 2004?more than $80 billion?were for liability coverage. As we look at 2005 and into 2006, we see this trend continuing.”
Auto theft was also cited as a significant factor that affects rates. I.I.I. noted preliminary data from the Federal Bureau of Investigation’s Uniform Crime Report that the number of auto thefts rose by 1.1 percent from 2002 to 2003, the fourth consecutive annual increase.
This followed a 1.5 percent increase in auto thefts in 2002, 5.9 percent in 2001, and 0.7 percent in 2000. An estimated 1.26 million auto thefts were reported in 2003, I.I.I. said.
The institute reported the nation’s highest theft rates were found in the West and South, with the lowest rates occurring in the Midwest and Northeast. The largest increases in auto theft were reported in medium-size cities and suburban areas.
I.I.I. said new vehicle security devices, such as electronic tracking systems, can help police find stolen vehicles and keep premiums down. Some insurers offer car owners these tracking systems at a discounted price with premium discounts, it was noted.
Fraud and abuse, I.I.I. said, remain major problems in some states, such as New York, Florida and Massachusetts. However, crackdowns by law enforcement agencies and insurers are starting to yield results.
The average driver will pay $870 in 2005, but what an individual driver pays will vary by state, insurance company and motorist, I.I.I. said.
I.I.I. said factors that influence the cost of coverage may include:
? The type of car and specific safety features.
? The amount of miles driven and type of driving.
? Family claim record, including the number of accidents and their severity.
? Driving record, including speeding tickets.
? Age, gender and experience of driver.
? Credit-based insurance score.