U.S. Drivers Are Finding Auto Insurance Is Highly Competitive and Increasingly Affordable

Auto Insurance Expenditures Growing at Slower Rate than Housing, Food and Health Care

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FOR IMMEDIATE RELEASE New York Press Office: (212) 346-5500; media@iii.org

NEW YORK, January 26, 2015--- Auto insurance is increasing in both affordability and availability, with policyholder expenditures rising below the rate of inflation and the percentage of uninsured motorists dropping, according to the Insurance Information Institute (I.I.I.).  These findings include individuals who finance their vehicles.

 

Expenditures for optional auto insurance policy coverages—collision and comprehensive—rose annually no more than 1 percent in the most recent year the National Association of Insurance Commissioners (NAIC) reported on the issue (2012). Meanwhile, the percentage of uninsured U.S. drivers declined to 12.6 percent from 13.8 percent between 2009 and 2012, according to a report by the Insurance Research Council (IRC).

 

“Auto insurance expenditures have remained relatively stable when compared to other life essentials, such as housing, food and health care,” said Dr. Robert Hartwig, president of the I.I.I. and an economist. “People are spending about the same for auto insurance as they did a few years ago, adjusted for inflation. Meanwhile, other expenses continue to eat up bigger portions of their budget.”

 

Dr. Hartwig made the observations in the wake of a Consumer Federation of America (CFA) press teleconference today, in which the CFA released a study on what insurance companies charge safe, low income drivers who have financed their car. Lenders generally require drivers who borrow to finance their vehicle to purchase collision and comprehensive coverage—neither of which is state-mandated—whereas liability insurance is required in 49 states.

 

Lower-income American households, defined by the federal government as those earning no more than $20,000 annually, spent 40 percent of their income on housing, 16 percent on food, and 8 percent on health care, according to an I.I.I. analysis of a 2012 survey on consumer expenditures released by the U.S. Labor Department’s Bureau of Labor Statistics (BLS). In contrast, these same households allocated about 2 percent of their disposable income to auto insurance, the BLS survey found.

 

“In the decade prior to the release of the 2012 report, the typical U.S. driver’s auto insurance expenditures increased by 10 percent while their housing expenditures rose 29 percent, food costs grew by 21 percent, and out-of-pocket health care spending went up by 52 percent,” Dr. Hartwig stated. The I.I.I. submitted its findings to the U.S. Treasury Department’s Federal Insurance Office (FIO) in June 2014 after the FIO sought public comments on the affordability and availability of U.S. auto insurance.

 

“All drivers—low-income and otherwise—benefit from a robust insurance marketplace where they can shop for the best policy at a competitive price, irrespective of how they pay for that vehicle,” noted Hartwig.

 

Expenditures for collision premiums rose 1.1 percent, on average, between 2011 and 2012, according to the NAIC, while the average expenditure for comprehensive insurance increased just 0.9 percent. Collision insurance covers the costs incurred by a policyholder after their insured vehicle collides with another car, structure, object (such as hail, or a tree), or person. Comprehensive insurance covers the cost of replacing a stolen vehicle, damage by flood and collision with an animal, among other things.

 

U.S. auto theft rates have decreased substantially from where they were 20-plus years ago, according to the National Insurance Crime Bureau. Yet there is evidence thefts occur at a higher rate in urban communities, as compared to suburban and rural areas, a risk factor auto insurers consider when pricing a policy.

To educate consumers about how to shop for auto insurance and save money, the I.I.I.’s website offers these resources:

 

 

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The I.I.I. has a full library of educational videos on its You Tube Channel. Information about I.I.I. mobile apps can be found here.

 

THE I.I.I. IS A NONPROFIT, COMMUNICATIONS ORGANIZATION SUPPORTED BY THE INSURANCE INDUSTRY.

 

Insurance Information Institute, 110 William Street, New York, NY 10038; (212) 346-5500; www.iii.org

 

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