The American auto insurance rates have declined for three straight years, dropping 5.6% nationwide from the high in 2004, according to the National Association of Insurance Commissioners' annual report released December 1st, 2009.
Another report also shows that the American car insurance quotes are cheaper and more affordable in the past year. The annual auto insurance rate quoted online to drivers in the U.S. averaged $1,804 in October 2009, down 5.6% from the $1,908 average premium for January 2009, according to RateWatch.
Low Cost Car Insurance Rates to Cut Budget
Americans want cheaper car insurance premiums to cut their budgets. For example, Democratic lawmakers in Michigan are promoting proposals to force the auto insurance industry to be more accountable and transparent. The proposed initiative would allow Michigan voters to weigh in on consumer-oriented insurance reforms that have saved California drivers an average of $3 billion per year since being enacted in 1988.
Consumer advocacy groups said that the proposal will make auto insurance more affordable in Michigan. It would reduce auto insurance rates in Michigan by 20%.
The auto insurance premiums quoted in Michigan averaged $1,998 in October 2009, around 11% higher than the national average; and car insurance premiums quotes in California average $1,729, around 13.5% lower than the Michigan average and 4.4% lower than the national average.
The proposal would require insurers to base rates primarily on a motorist's driving record rather than factors like their credit scores, occupation and education, which currently dominate the pricing structure of many insurers.
Cheap Car Insurance Targets Comparison
Michigan wants to get the cheapest car insurance rate in the new century through the proposal. But this may not come consequentially, for two reasons:
The first is the decreasing profits of auto insurance industry.
People with good driving records will no doubt pay lower car insurance premiums under the new proposal. But the average insurance quotes may not, for they also depend on the profits of the insurance industry. In fact, personal auto insurers in Michigan suffered a 10-year underwriting loss of 19.2% of earned premiums, while their 10-year operating return resulted in a loss of 2.4% of premiums.
Low underwriting profit and low investment returns may drive the average car insurance premiums up, which has happened in UK.
The British car insurance industry hasn’t made an underwriting profit for 11 years, according to the Association of British Insurers; and the Bank of England’s record low interest, which was cut to 0.5% in March, is squeezing the investment returns of car insurance companies too. As a result, the British car insurance industry had to raise their average annual car insurance rates by 12.95% from the 2008 level and 23.31% from the 2007 level, and a further 5% increase is expected by the car insurance providers, according to research by Deloitte LLP.
The second is economic recovery.
One reason that car insurance rates decreased in the past year is the economic setback. With a worse economic situation, fewer drivers are on the road. This leads to fewer traffic accidents. With lower claims expenses, motor car insurance companies can lower premiums. But with economic recovery, the claims expenses may rise again, which will drive up the car insurance quotes.
References:
U.K. Car Insurers to Raise Rates as Investment Income Dwindles, Dec. 3 (Bloomberg)
Average Car Insurance Rate Savings by State, Daniel Workman
Michigan Debate Over Proposed Auto Insurance Changes Heats Up
Chen Nanyang - Chen Nanyang's journalist career began in 2002 when he started writing for China's Nanfang City News, Singapore's United Morning Post and ...
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