Competition in U.S. auto insurance market benefits drivers

The Insurance Information Institute (III) reports that despite insurance being a heavily regulated industry in the United States, a highly competitive auto insurance marketplace is making coverage more widely available and affordable for all drivers.

The cost of auto coverage has risen more slowly south of the border than has the cost of medical care and gasoline, the I.I.I. noted July 22 in response to an analysis released by the Consumer Federation of America (CFA).

The CFA, a non-profit association of almost 300 non-profit consumer groups, argued that its analysis conducted in May and June 2013 shows some major auto insurers charge higher rates to drivers with less education and lower-status jobs. The analysis involved the 10 largest auto insurers by market share in 10 major urban areas in different parts of the country, the CFA reports.

The driver studied was a 30-year old single woman renting in a moderate-income area, driving a 2003 vehicle, with 10 years of driving experience and no accidents or moving violations, and without insurance coverage for the past 15 days.

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“Auto insurers charge high premiums for minimal coverage to most working people, even those with perfect driving records, who live in urban areas,” CFA executive director Stephen Brobeck says in the statement.

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Robert Hartwig, president of the I.I.I. and an economist, responds that auto insurers are competing for the business of every driver. “These market forces have created a favourable situation for the nation’s drivers when considering what they’ve had to pay for other products and services essential to their daily lives,” Hartwig says in the I.I.I. statement.

J. Robert Hunter, CFA’s director of insurance, charged that the “quoted prices (in the analysis), especially the nine exceeding $2,000, show that insurers either are overcharging lower-income consumers or are not interested in serving them.”

Rather than looking at price quotes, notes the I.I.I. statement, the National Association of Insurance Commissioners examined what the typical U.S. driver actually paid annually in auto insurance premiums, determining it was $786 in 2002 and $791 in 2010. The I.I.I. projects the per annum expenditure for auto insurance grew to $819 in 2012, the statement adds.

Wondering what determines the cost of your auto insurance premium? We’ve got the lowdown here: http://t.co/2qIBTUe6We

— I.I.I. website (@iiiorg) July 23, 2013

“The most effective ways to lower the price of auto insurance is to reduce the cost of medical care and auto repair while at the same time aggressively combating insurance fraud, which levies a hidden tax on drivers,” Hartwig contends. “Changing underwriting and rating factors that have been shown to project an insurer’s future claims payouts accurately will only distort prices and result in good drivers subsidizing riskier ones.”