Smart Auto Insurance Blog

According to insurance.com’s monthly Car Insurance Rate Watch Report, average car insurance rates in March decreased in 19 states (compared with February).   Rates were higher in 15 states on average and basically unchanged in 13 states.

The 5 states that enjoyed the largest rate decrease in March were:

1. Arizona
2. Virginia
3. New Hampshire
4. Texas
5. Georgia

The 5 states where average car insurance rates increased the most in March were:

1. South Dakota
2. Nebraska
3. Minnesota
4. Maine
5. West Virginia

In addition, insurance.com found that two-thirds of March auto insurance shoppers were seeking a new policy because their rate was too high, or they received their bill and the rate had gone up.

The first major impact on auto insurance brought on by the economic downturn that received a great deal of media attention was that many people were going without auto insurance because they couldn’t afford it despite the fact that it is required by law.  In less severe cases they were simply reducing their levels of auto insurance coverage.

Another impact to auto insurance has been cases of auto insurance fraud.

• In Hawaii, auto insurance fraud convictions are up 61% from 2007 to 2008.
• Cases of abandoning vehicles and then reporting them stolen are up 33% over same time frame
• Pennsylvania auto insurance fraud cases are up 30%

Industry experts say this phenomena is not unusual, auto insurance fraud increases are typically experienced during an economic downturn such as the one we are experiencing today.  Unfortunately, other drivers pick up the tab on the $6 billion in fraud cases in the form of excess auto insurance payments.

According to 90.9 WBUR, The Urban Insurance Agents of Massachusetts (A trade association) say that over the next year more than 12,000 drivers per month who mostly live in urban or inner-city areas will lose their auto insurance coverage due to auto insurance deregulation otherwise known as managed competition.

Auto insurance companies in Massachusetts are no longer required to offer auto insurance coverage to neighborhoods they consider to be high-risk such as: Brockton, Springfield, Worcester, Dorchester, and Roxbury among others.

Massachusetts Drivers who are non-renewed can shop for auto insurance through an agent, online or through their own research in the competitive Massachusetts marketplace…or through the Massachusetts Auto Insurance Program (MAIP).

More information about Massachusetts Auto Insurance, and online quotes.

According to the Baltimore Sun’s Liz Kay, 67 Maryland auto insurance companies have been fined by the state’s Insurance Administration. The insurers were found to have under compensated drivers whose cars have been deemed a total loss, by failing to take into account increases in state sales tax and Motor Vehicle Administration fees when calculating a car’s value.

Liz reports that the over 4,000 drivers affected have already received refunds, averaging about $100 each (total restitution being $442,000). The companies (listed here) were also charged a $235,000 fine. Always make sure to make sure exactly what level of auto insurance claim your policy covers, so you aren’t greeted with an unpleasant surprise.

“High-risk” or drivers with a checkerd driving history have always paid more for their auto insurance coverage from coast-to-coast.  However, in Maryland the upcharge for being a “bad driver” is unusually steep.

The insurer of last resort in Maryland is prohibited from allowing high-risk drivers to pay their auto insurance premiums in installments (ex. monthly) like other drivers, they must pay the entire annual premium up-front.  If they can’t afford to pay the entire year of premiums up-front ($2,500 per year on average) they must borrow money to finance the premiums.  In these cases 75% of the interest is within 5 months, in case the policy is canceled early

The system has been denounced as unfair to 70,000 low income or immigrant drivers in Maryland who are forced into this pool, after being turned down by other auto insurance companies.

About half the drivers enrolled in the pool are eventually canceled for nonpayment and more than 60% have no traffic offenses but were refused other auto insurance coverage because they lack a credit history or driving experience. Thousands are recent immigrants.

More information about Maryland auto insurance.

A USA today article speculates that auto insurance rate increases have been driven by poor market returns by insurance companies.  The writer speculates that rates will rise 4% on average in 2009 on top of the 3% average national increase in 2008.

Insurance companies’ fortunes are more directly tied to stock market and other investment success than other industries as they receive premiums up front (sometimes as much as a full year) and invest these upfront payments ( primarily in bonds, but some stocks as well) until they are needed to pay claims.   If market returns are negative, it is not hard to see that insurance companies will struggle financially.

Wisconsin auto insurance liability limits have not changed in 25 years, but may be changing soon.  Two groups:  Citizen Action of Wisconsin, and Wisconsin Association for Justice are seeking to have those minimums increased, and agree with Gov. Jim Doyle who has proposed the limits rise to $100k per individual $300k per accident and $10k for medical expenses.  The current limits are $25k/$50k/$1k.

The driver behind the change request stems from the steep increase in both medical costs and vehicle repair costs over the same time frame, which has made the consumer the loser over time because insurance coverage in many cases is not sufficient to cover the cost of an accident.

According to the Associated Press, Michigan auto insurance policy holders will soon have to pay more in fees as of July 1st. The Michigan Catastrophic Claims Association raised its fee, which covers seriously injured victims of car accidents, to $125 per vehicle. The charge is a $20 increase from last year.

Since Michigan is the only state that offers unlimited lifetime medical benefits through auto insurance for the seriously injured, the MCCA levies the fee to cover rising medical costs. The fee was actually reduced by $18 last year; however, that was due to investment gains that reversed themselves this year.