Study Quantifies Impact of Filing a Claim on Auto Insurance Rates

"We get a lot of questions from consumers about, 'Should I make a claim? I've had this happen, or I've had that happen,'" Adams says. "There are so many variables that go into it; we wanted to dig into it and see what's going on around the nation."

The study used a hypothetical 45 year-old married female driver who is employed, has an excellent credit score, no lapse in coverage and has filed no prior auto-insurance claims. It assessed how much annual premiums can increase after filing one of three different types of claims: bodily injury, property damage and comprehensive.

It also looked at the impact of the claim's dollar amount ($500, $750, $1,000 and $2,000 or more) and compared the average premium increases for all 50 states and Washington, D.C.

The report "confirmed everyone's worse suspicions," she says. The biggest lesson for consumers? "Not to file a small claim."

Findings show that rates vary considerably from carrier to carrier and from state to state; the study by Quadrant Information Systems looks only at the averages in each state, after surveying the five or six carriers with the largest population of policyholders in that state.

"Over 85% on average is the increase for a second claim within a 12-month period," Adams says. "Obviously these rates may not last forever, but as long as the claim is on your report you can have it affect your rates for three to five years."

While it does make sense in some cases to file a claim, Adams notes: "The key for the consumer is, where is the cutoff? It's pay out of pocket vs. see your rate skyrocket."

The study showed increases vary by state, and after a single claim, range from a 20% hike in Maryland to a 67% hike in Massachusetts. Bodily injury and property damage (including collision) claims were the most expensive (at a 42% and a 41% increase, respectively), while comprehensive claims (for non-collision events such as theft) are the cheapest, with a mere 2% hike.

The company's web page www.insurancequotes.com includes a calculator for consumers to assess whether a claim is worth pursuing, based on such data as where the driver lives, deductibles, premium, and estimated claim amount. It also gives consumers some financial guidance for their situation and state, Adams says.

For example, a New Jersey driver with an annual insurance premium of $1,000 and a deductible of $500 may want to think twice about filing a property damage claim for estimated damages under $1,200. According to the calculator, such a driver making a first-time claim of $500 or more can expect rates to increase by an average of 24.74% for about three years. The calculation includes advice: "You should consider making a claim if the amount is $1,242.19 or more."

In states showing high increases, the premium is pretty low to begin with, Adams says. That excludes New Jersey, where premiums start out rather high—the state's premium rates are "well above the national average"—and go up even higher once a claim is made.

Adams suggests consumers talk over any potential claims with their insurance representative before actually filing any claim. "And don't tell them about damages; they can enter it on a report," she says. "Make it clear you're not making a claim, you're just asking 'What if?'"

InsuranceQuotes issued a similar report for homeowners insurance in October, which determined that residents of Minnesota, Connecticut and Maryland experience the highest premium increases on their homeowner's policies after paying one claim, and on average, those filing a single claim in Minnesota can expect their annual premium to increase by 21%.

See the top-5 and bottom-5 states for increases on the next page.

The following five states showed the greatest average premium increase as a result of filing any type of claim of $2,000 or more:

1. Massachusetts — 67% increase

2. California — 62% increase

3. New Jersey — 59% increase

4. North Carolina — 47% increase

5. Minnesota — 45% increase

Meanwhile, the following five states, on average, showed the smallest percentage premium increase as a result of filing any type of claim of $2,000 or more:

1. Maryland — 20% increase

2. Alabama — 22% increase

3. Michigan — 23% increase

4. Wyoming — 23% increase

5. Oklahoma — 25% increase