Facts + Statistics: Auto insurance

Costs and expenditures

The countrywide average auto insurance expenditure decreased 2.27 percent to $1,047 in 2020 from $1,070.4 in 2019, according to the National Association of Insurance Commissioners. In 2020 (the latest data available), the average expenditure was highest in Louisiana ($1,494.70), followed by New York ($1,436.45), and Michigan ($1,418.50).

To calculate average expenditures, the National Association of Insurance Commissioners (NAIC) assumes that all insured vehicles carry liability coverage but not necessarily collision or comprehensive coverage. The average expenditure measures what consumers spend for insurance on each vehicle. It does not equal the sum of liability, collision and comprehensive expenditures because not all policyholders purchase all three coverages. The average expenditure measures what consumers actually spend for insurance.

Your Driving Costs, a 2022  study from AAA, found that the average cost to own and operate a 2022 model vehicle was $10,728 in 2022 when it is driven 15,000 miles per year. The average full-coverage insurance cost for medium sedans was $1,694, compared with $1,529 for a medium SUV. The average insurance cost for all vehicles, including pickups and hybrid and electric vehicles, was $1,588. These cost estimates are based on a full coverage policy for a driver under 65 years of age with more than six years of driving experience, no record of accidents, and residency in a suburban/urban location.

79 percent of insured drivers purchase comprehensive coverage in addition to liability insurance, and 75 percent buy collision coverage, based on a Triple-I analysis of 2020 NAIC data.

The coverage is for a policy with $100,000/$300,000 personal liability, $25,000 medical, $100,000 property and $25,000/$50,000 uninsured/underinsured motorist coverage, with a $500 deductible for collision and comprehensive claims. These figures are not comparable with the National Association of Insurance Commissioners’ auto expenditures data, below.

Auto insurance expenditures, by state

The tables below show estimated average expenditures for private passenger automobile insurance by state from 2016 to 2020 and provide approximate measures of the relative cost of automobile insurance to consumers in each state. To calculate average expenditures, the National Association of Insurance Commissioners (NAIC) assumes that all insured vehicles carry liability coverage but not necessarily collision or comprehensive coverage. The average expenditure measures what consumers spend for insurance.

Expenditures are affected by the coverages purchased as well as other factors. The NAIC does not account for policyholder classifications, vehicle characteristics or the amount of deductibles selected by the policyholder, differences in state auto and tort laws, rate filing laws, traffic conditions and other demographic variables, all of which can significantly affect the cost of coverage. The NAIC notes that three variables—urban population, miles driven per number of highway miles, and disposable income per capita—are correlated with the state auto insurance premiums. It also notes that high-premium states tend to also be highly urban, with higher wage and price levels, and greater traffic density. Many other factors can also affect auto insurance prices.

Auto Insurance Affordability

Louisiana, Florida and Michigan are the least affordable states for auto insurance, while Iowa is the most affordable state, according to a study from the Insurance Research Council (IRC). The report, Auto Insurance Affordability: Countrywide Trends and State Comparisons, looks at the auto insurance expenditure share of income, which ranges from a low of 1.02 percent in Iowa for 2018, the latest data available, to a high of 3.09 percent in Louisiana. U.S. households on average spent 1.67 percent of their income on auto insurance. The IRC developed an affordability index based on average auto insurance expenditures published by the National Association of Insurance Commissioners (NAIC) (see charts here) and median household income from the U.S. Census Bureau. According to the IRC, Louisiana, Florida, and Michigan have maintained their respective rankings as the first, second, and third least affordable states since 2014. The IRC notes that since the index is a ratio, some states with high average auto insurance expenditures rate lower on the affordability rankings because of higher-than-average median income (such as DC), while other states are pushed up the ranks of least affordable states by having low median household income (such as Mississippi). The analysis discusses the affordability of auto insurance for the overall population and does not address the issue of affordability among underserved populations.

Premiums

Auto claims

Liability insurance pays for the policyholder’s legal responsibility to others for bodily injury or property damage. Collision and comprehensive insurance cover property damage and theft to the policyholder’s car.

The shared/residual market and nonstandard markets

All states and the District of Columbia use special systems to guarantee that auto insurance is available to those who cannot obtain it in the private market. These systems are commonly known as assigned risk plans. Assigned risk and other plans are known in the insurance industry as the shared, or residual, market. In assigned risk plans, high-risk policyholders are proportionally assigned to insurance companies doing business in the state. In the voluntary, or regular, market, auto insurers are free to select policyholders.

Motorists can also obtain auto insurance from the nonstandard portion of the private market. The nonstandard market is a niche market for drivers who have a worse than average driving record or drive specialized vehicles such as high-powered sports cars or custom-built cars. It is made up of both small specialty companies, whose only business is the nonstandard market, and well-known auto insurance companies with nonstandard divisions.

Collision losses

The chart below shows the claim frequency and average loss payment per claim and average loss payment per insured vehicle year under collision coverage for recent model vehicles. The claim frequency is expressed as a rate per 100 insured vehicle years. A vehicle year is equal to 365 days of insurance coverage for a single vehicle.

Consumer prices

To shed light on inflation, the Bureau of Labor Statistics maintains a consumer price index (CPI) which tracks monthly and annual changes in the average prices paid by urban consumers for a representative basket of goods and services. The Consumer Price Index for All Urban Consumers (CPI-U) represents data for 93 percent of the U.S. population not living in remove rural areas, institutions, or on military bases. The CPI-U rose 8 percent in 2022. The cost of motor vehicle insurance for these consumers increased 7.9 percent in 2022 while the cost of used cars and trucks increased 12.7 percent.