NAIC Says D.C. Has Top Auto Policy Cost

During 2000, the District, with an average expenditure of $996.39 was in first place among the top five, passing New Jersey, which dropped to second place at $977.07, followed by Massachusetts, $945.61, New York, $935.64 and Connecticut, $871.20 in that order. In last place was South Dakota with an average expenditure of $478.42.

Countrywide, the NAIC said, the average expenditure was $686.71.

The NAIC study defines average expenditure as the ratio of total written premium to liability exposures (liability car-years).

The countrywide combined average premium (written premium divided by written car-years) was $785.80, according to the report. The components of that average were an average liability premium of $397.58, average collision premium of $256.58, and average comprehensive premium of $131.64.

The findings drew a bitter blast from John Cucci, vice president for the Alliance of American Insurers' northeast region, who called the rankings "nothing more than an exercise in irrelevance and a misleading barometer of who pays how much for car insurance in New York and New Jersey."

He added that, "The debate over whether New York or New Jersey drivers spend more for their car insurance is a manufactured debate that ignores the realities of insurance economics and wastes valuable media space and time that could be put to better purposes."

According to Mr. Cucci, "The NAIC report simply takes premium and divides it by the number of insured cars to come up with a so-called average. The fact of the matter is that drivers do not pay average premiums and there are no ?average drivers.' Drivers pay a premium for car insurance based on accident frequency of the rating territory, where the person garages the car, age, driving record, type of vehicle driven, and use of the car insured.

"The NAIC method, in effect, presupposes a one-territory state where everybody pays the same price regardless of accident involvement or driving history. Try selling that to the people of New York or New Jersey."

By Mr. Cucci's analysis, auto insurance premiums vary throughout New York State. "People in the five boroughs and Buffalo pay more for their coverage than people in Plattsburg, Glens Falls, or the Southern Tier. The suburbs pay less than the city, rural areas less than urban, and so on," he said.

"Certain areas of New York State will have lower premiums than the so-called NAIC national average, other territories will have higher premiums. This average premium methodology is reminiscent of the anecdote about the ?actuary who drowned in the river, whose average depth was six inches.' It appears to us that the NAIC actuaries who assembled these premium rankings belong to the ?six-inch-deep' school of thought.

"Also, drivers in rural areas of New Jersey pay less than drivers in urban areas of the state and less than drivers in some parts of New York, depending on the accident statistics for a specific rating territory.

"Moreover, these NAIC rankings do not take into account differences in coverage throughout the United States. New York has a very generous no-fault law with generous coverage, both mandatory and optional, as does New Jersey.

"So by comparing New York and New Jersey with rural and less industrialized areas, having different and less comprehensive coverage, also produces no reliable cost comparisons."

Among its footnotes, the report said that the "District of Columbia and New Jersey are entirely urban and their results cannot be directly compared to the results of states with rural areas."

Mr. Cucci complained: "The NAIC report for the first time in several years acknowledges this discrepancy. The real issue is, why do they continue to publish such misleading information?"

According to the NAIC, New Jersey, on the basis of a combined average premium of $1,146.39, was first in the nation, followed by District of Columbia, $1,143.71; New York, $1,091.43; Massachusetts, $1,028.62 and Rhode Island, $972.01.

New York had the highest average liability premium, at $613.27, followed by Massachusetts, $596.58; New Jersey, $586.74; Delaware, $566.03 and Connecticut, $549.24.

The highest average collision premiums were paid in Michigan, $400.31, followed by New Jersey, $373.22; District of Columbia, $368.40; Georgia, $323.44 and Alaska, $317.15.

District of Columbia was on top again with average comprehensive premium, $227.23, followed by Colorado, $201.89; Kansas, $193.95; Wyoming, $191.11 and New York, $189.56.