Personal auto insurance is becoming more affordable for allincome groups. According to a new report conducted by the InsuranceResearch Council (IRC), auto insurance has become more affordablefor the nation as a whole and on a state level. The study,Trends in Auto Insurance Affordability, alsorevealed that other critical industries are not showing that degreeof auto insurance affordability improvement.

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Auto insurance affordability was analyzed by calculating an autoinsurance expenditure-to-income ratio. The findings examine trendsin affordability, thus reducing the intrinsic subjectivityconnected to affordability analysis.

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Related: Is auto insurance “affordable?” Ask theFIO

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Insurance expenditure data from the National Association ofInsurance Commissioners (NAIC) and the Bureau of Labor StatisticsConsumer Expenditure Survey was used to calculate the autoinsurance expenditure-to-income ratio. Results from both methodsshowed dramatic improvements in national auto insuranceaffordability over the long-term for average and low-to-moderateincome (LMI) consumers. Presently, approximately 1.5% to 1.6% ofincome is spent on auto insurance in the U.S. (depending on thedata set used) by the average consumer—figures much lower than inprevious decades. Similar trends have been seen by LMIconsumers.

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The study also showed an improvement in auto insuranceaffordability in most states. Between the 1990s and 2000s, onlyfive states did not experience improved affordability and only fourbetween the 2000s and the present. Results across states with thelowest affordability, according to the report, are as follows:Louisiana (2.85% of income), Florida (2.45%), New York (2.42%),Delaware (2.18%) and Michigan (2.10%). The most affordable stateswere found to be North Dakota (1.03% of income), Iowa (1.05%), NewHampshire (1.06%), Virginia (1.07%) and Wyoming (1.08%).

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Elizabeth Sprinkel, senior vice president of the IRCsaid, “There is a lot of interest in the affordability of autoinsurance on the part of consumers, policymakers and regulators.This report adds to the discussion, showing that auto insurance isbecoming more and more affordable.”

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Source: Insurance Research Council

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Trudy Knockless

Trudy Knockless is a reporter on ALM Media's Business of Law desk.  She has a background serving legal and insurance publications. Contact her at [email protected] or on LinkedIn at Trudy Knockless.