Facts Statistics: Auto insurance, III, insurance prices.#Insurance #prices

Facts + Statistics: Auto insurance

Costs and expenditures

The countrywide average auto insurance expenditure rose 3.3 percent to $866.31 in 2014 from $838.49 in 2013, according to the National Association of Insurance Commissioners. In 2014 (the latest data available), the average expenditure was highest in New Jersey ($1,263.67), followed by Michigan ($1,227.36), and New York ($1,205.03).

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 actually 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.

AAA’s 2016 Your Driving Costs study found that the average cost to own and operate an average sedan was $8,558 in 2015, down 1.6 percent from $8,698 in 2014. The decline reflects reduced gasoline costs offsetting increases in maintenance, insurance, finance charges and other costs. Average insurance costs for sedans rose 9.6 percent, or $107, to $1,222 in 2015 from $1,115 in 2014. AAA insurance cost estimates are based on a full coverage policy for a 47-year old male with a clean driving record for a policy with $100,000/$300,000 bodily injury liability coverage with a $500 deductible for collision and a $100 deductible for comprehensive coverage. Figures are not comparable with the National Association of Insurance Commissioners’ Auto Expenditures data below.

Average Expenditures For Auto Insurance, 2005-2014

Source: © 2017 National Association of Insurance Commissioners (NAIC).

  • 78 percent of insured drivers purchase comprehensive coverage in addition to liability insurance, and 73 percent buy collision coverage, based on an I.I.I. analysis of 2014 NAIC data.

Auto insurance expenditures, by state

The tables on the following pages show estimated average expenditures for private passenger automobile insurance by state from 2010 to 2014, providing 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 actually 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.

Expenditures are affected by the coverages purchased as well as other factors. In states with a healthy economy, people are more likely to purchase new cars. Since new car owners are more likely to purchase physical damage coverages, these states will have a higher average expenditure. 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. Other factors can also affect auto insurance prices.

Top 10 Most Expensive And Least Expensive States For Automobile Insurance, 2014 (1)

(1) Based on average automobile insurance expenditures.

Source: © 2017 National Association of Insurance Commissioners (NAIC).

Top 10 Most Expensive And Least Expensive Cities For Auto Insurance, 2014 (1)

(1) Based on a 26-year-old male without any history of accidents, insuring a 2012 Toyota Camry. Assumes $100,000/$300,000/$50,000 liability limits with a $500 deductible. To calculate city averages, NerdWallet used only ZIP codes within city limits and not in the city’s metro area.

  • Detroit is the costliest city for auto insurance and had more than double the expenditures of the second costliest city, New Orleans.
  • Six of the least expensive cities for auto insurance were in North Carolina, led by Winston-Salem.

Average Expenditures For Auto Insurance By State, 2010-2014

(1) Ranked highest to lowest by average expenditure.

Note: Average expenditure=Total written premium/liability car years. A car year is equal to 365 days of insured coverage for a single vehicle. The NAIC does not rank state average expenditures and does not endorse any conclusion drawn from these data.

Source: © 2017 National Association of Insurance Commissioners (NAIC).

Premiums

Private Passenger Automobile Insurance, 2007-2016

(1) After reinsurance transactions, excludes state funds.

(2) After dividends to policyholders. A drop in the combined ratio represents an improvement; an increase represents a deterioration.

(3) Calculated from unrounded numbers.

Source: NAIC data, sourced from S P Global Market Intelligence, Insurance Information Institute.

Top 10 Writers Of Private Passenger Auto Insurance By Direct Premiums Written, 2016

(1) Before reinsurance transactions, includes state funds.

(2) Based on U.S. total, includes territories.

(3) Data for Farmers Insurance Group of Companies and Zurich Financial Group (which owns Farmers’ management company) are reported separately by S P Global Market Intelligence.

Source: NAIC data, sourced from S P Global Market Intelligence, Insurance Information Institute.

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.

Private Passenger Auto Insurance Losses, 2007-2016 (1)

(1) For all limits combined. Data are for paid claims.

(2) Excludes Massachusetts and most states with no-fault automobile insurance laws.

(3) Excludes Massachusetts, Michigan and New Jersey.

(4) Claim frequency is claims per 100 car years. A car year is equal to 365 days of insured coverage for one vehicle.

(5) Claim severity is the size of the loss.

(6) Includes loss adjustment expenses.

(7) Excludes Massachusetts, Michigan and Puerto Rico. Based on coverage with a $500 deductible.

(8) Excludes wind and water losses.

(9) Includes glass losses.

Source: ISO®, a Verisk Analytics® business.

  • In 2016, 1 percent of people with liability insurance had a bodily injury liability claim, while 3.9 percent of those with liability insurance had a property damage liability claim, according to ISO.
  • In 2016, 6.1 percent of collision insurance policyholders had a claim, while 2.8 percent of people with comprehensive coverage had a claim.
  • In 2016 the average auto liability claim for property damage was $3,683; the average auto liability claim for bodily injury was $16,110.
  • In 2016 the average collision claim was $3,435; the average comprehensive claim was $1,748.

Incurred Losses For Auto Insurance, 2012-2016 (1)

(1) Losses occurring within a fixed period, whether or not adjusted or paid during the same period, before reinsurance.

Source: NAIC data, sourced from S P Global Market Intelligence, Insurance Information Institute.

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. Each type of system is commonly known as an assigned risk plan, although that term technically applies to only one type of plan. The assigned risk and other plans are known in the insurance industry as the shared, or residual, market. Policyholders in assigned risk plans are assigned to various insurance companies doing business in the state. In the voluntary, or regular, market, auto insurers are free to select policyholders.

The percentage of vehicles insured in the shared market is dropping, in part because of the evolution of the nonstandard sector of the voluntary market. The nonstandard market is a niche market for drivers who have a worse than average driving record or drive specialized cars such as high-powered sports cars and 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.

Until the mid-1960s, most drivers who did not meet an insurance company’s “standard” or “preferred risk” underwriting criteria could only find coverage in the shared market, where prices are generally much higher and insurers pool or share the profits and losses. With advancements in computer technology that made it easier to set appropriate prices for smaller and smaller risk categories, some insurers began to specialize in insuring drivers with marginally bad driving records. By the late 1990s the nonstandard market accounted for about one-fifth of the total private passenger auto insurance market. This has held steady. A 2008 Conning study found that in 2006 auto insurers specializing in nonstandard private passenger auto insurance had direct premiums written of $36.9 billion, representing 22 percent of the total private passenger auto insurance market.





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