Insurance Rates Continue to Rise Despite Less Driving

It seems like a simple equation: High gas prices lead fewer people to drive, which leads to fewer accidents. Fewer accidents overall means auto insurers pay out less money, which means insurance rates should go down. This, however, has not been the case.

Even though some states have seen reductions in the cost of insurance (California), many more have seen increases (New York, North Carolina). Overall, the price of insurance is steadily trending upward, even over the past few months when Americans have been driving in significantly reduced numbers. Premiums have risen 1.7%, which is more than four times the rate of increase for the same time period in 2007.

How is it that Americans can drive less and get higher insurance premiums anyway? Insurers point to the rising cost of raw materials — everything from plastic to steel to paint — as the source of the increase, but government regulators are skeptical. States that have heavier regulation tend to deliver better prices to consumers, and these states view the insurance industry as suspect when it says it wants to raise rates (by as much as 13% in North Carolina).

Accident information for June will not be available until mid-September, but if accidents declined along with miles driven, it will be harder for insurers to justify continued price escalation.

Driving is Down, but Auto Insurance Rates are Rising (The New York Times)

Comments

Simple, less people getting insurance, where does insurance company getting their usual income from? Raising prices.

Yes but less driving means less claims which means less payouts which means more profit on lower sales dollars.

Which means we're getting scr3wed by the insurance companies as usual.

And this is news?

My homeowner's insurance rate went up a few slightly this year (for the same exact coverage--they didn't increase the value of my house "to keep rates low").

Regardless of fewer miles driven, I believe there is no shortage of bad drivers. On any given day you can see countless drivers flat out disobeying basic laws (speeding, running lights, pulling out in front of people, performing near pit-maneuvers and failing to use the lever marked "turn signal". People tend to forget common courtesy and operate vehicles with no brake lights, bald tires etc while talking/texting on the cell phone, eating, applying makeup, reading etc... all the while on the wrong side of the road. Why else would insurance rates increase?

Insurance companies make profits by investing the money they hold for payouts. Therefore, when the stock market does poorly, they raise rates to keep their quarterly earnings up to the expectations of the stockmarket. Jerks.

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