IRC: Auto Insurance Affordability Got Better Over Last Decade

AffordabilityIRC12-2013Auto insurance affordability increased in nearly all states since the 1990s and the improvement was experienced by both low- and middle-income drivers, according to a new report from the Insurance Research Council (IRC).

The IRC said this week that each of the 50 states and Washington, D.C., “saw affordability improve from the period 2001-05 and period 2006-10.”

The Council said that it used data from the National Association of Insurance Commissioners and U.S. Census Bureau for the study, which compared statewide auto insurance expenditures with income data to “measure and track changes in auto insurance affordability.”

The ratio, according to the study, “documented significant improvement” in affordability for both middle- and low-income groups.

The IRC said that its study showed that, between 1990 and 2000, only six states saw an increase in the expenditure-to- income ratio:

  • Alaska
  • Montana
  • Michigan
  • Louisiana
  • Florida
  • Wyoming

Patrick Schmid, the IRC’s director of research, said in a statement that a states’ increased affordability was linked to “several factors that may be driving that improvement.”

Those factors are:

  • Less regulation of insurance prices
  • More-competitive auto insurance markets
  • Smaller residual markets
  • Moderate compensation for injuries
  • Lower rates of uninsured motorists
  • Lower unemployment rates

The study’s findings on the relation between market regulation and affordability went against a recent study from the Consumer Federation of America (CFA) on the cost of car insurance over the past quarter-century.

“Strong regulatory oversight” in California, which requires prior approval of rates by market regulators, contributed to the Golden State being the only state in the U.S. where the average expenditure on auto coverage decreased between 1989 and 2010, Bob Hunter, the CFA’s director of insurance, told Online Auto Insurance News (OAIN) about the CFA’s study, released last month.

Photo courtesy of Insurance Research Council

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