Drivers in Iowa, North Dakota and South Dakota had the most affordable average car insurance premiums nationwide for in 2009, while Louisiana and D.C. had the highest average premiums, according to a new report from a national association of regulatory officials.
The state with the lowest combined rates for private vehicle coverage was Iowa, where residents paid an average $631 a year for a policy with liability, comprehensive and collision coverage, according to the National Association of Insurance Commissioners’ 2008/09 database report. North Dakotans paid a combined average of $650 per year, and their neighbors to the south paid an average of $1 more than that in annual premiums.
Rates in all three states were well below the nationwide average of $901.
North Dakota Insurance Commissioner Adam Hamm hailed the report’s implications for residents of his state.
“While other costs go up, North Dakota’s auto insurance premiums continue to hold steady and the market remains very competitive,” Hamm said in a news release. “This is good news for our state’s insurance consumers.”
Louisiana auto insurance was the most expensive nationwide, costing motorists $1,270 a year on average, followed by Washington, D.C. ($1,265) and New Jersey ($1,218), according to the report, which was produced by an actuarial and statistical task force formed by the NAIC.
The report, which is available for a fee on the NAIC website, includes data on written premium and exposure in each state for 2005 through 2009 and on earned premium and exposure, incurred loss and claims data for 2006 through 2008.
Information for each state includes average premium and expenditures, claim frequency and severity, as well as pure premium and loss ratio. Researchers arrived at average annual premiums for each state after including data on bodily injury and property damage liability—including no-fault coverage—plus uninsured and underinsured motorist, medical payment, collision and comprehensive coverages, according to NAIC.
Officials with the organization say many factors go into determining the cost of insuring a car in a particular state, including state laws regulating minimum levels of coverage, insurer underwriting and repair costs, accident and auto theft rates and other data.
That makes direct comparisons between states difficult, according to NAIC, which also said that the most recent report may differ with previous research because of updates to data on earlier years.
Key factors that coverage providers look at when setting rates include a person’s driving record, average annual mileage, the geographic area in which the motorist lives and how likely it is for drivers there to be involved in accidents or have their vehicles stolen.
Premiums Slowly Rising for Three Cheapest States
The NAIC report shows that average premiums have crept up in recent years in all three of the states with the lowest rates.
According to earlier research by NAIC officials, average premiums were $616.45 annually in Iowa as of 2008, and average rates in North and South Dakota were $643.59 and $651.33, respectively.
The analysis shows that policy rates nationwide have fallen in recent years, however, with 2008 rates nearly two dollars higher and average premiums dropping nearly $70 from 2004.
Experts say premiums could soon go back up across the country, however, because the vehicle coverage industry is expected to enter into a so-called “hard market” this year that could see premiums rise and policies become harder to find for consumers who are viewed as above-average risks to insure.
The industry has reportedly been in a “soft market” since 2006, with premiums fairly stable and plenty of coverage options for consumers to choose from.
Industry experts say increased competition during soft markets forces insurers to reduce rates so low that some may be forced out of business, and the subsequent decrease in supply causes premiums to climb quickly during resulting hard markets.