The rise in auto insurance costs is more sensible in the US because of its huge average per capita auto usage rate. Here is a coverage of this issue in the Forbes site.
Despite the near-constant barrage of TV commercials and other advertisements featuring lizards, wry jokes and bouffant-wearing saleswomen professing to consumers that their particular company offers low-cost auto insurance, the truth is that rates are going up these days, not down. In fact, the auto insurance industry jacked their rates an estimated 10% between 2008 and 2010, according to the Insurance Information Institute as reported by smartmoney.com. That’s not all—drivers can anticipates rates jumping an extra 4% this year, the end result being an approximate 31% increase since the start of the new millennium. That would make the average annual cost of car insurance $900, up from $690.
“There is a total disconnect between what we see on TV and what the insurance companies are taking out of our pockets,” said executive director of advocacy group Consumer Watchdog Douglas Heller to smartmoney.com.
“It’s cost-based pricing,” claimed Larry Thursby, vice president of personal auto insurance for Nationwide Mutual Insurance as per smartmoney.com. “As our costs increase and decrease, so goes our costs to customers.”
The increasing costs he is referring to are the exorbitant medical bills auto insurers have to settle for accident-related injuries, in addition to expensive automobile parts and repairs.
Also helping to drive up insurance premium prices are drivers without any out insurance at all. Says Greg Horn, of Mitchell International, which provides technology services for insurance and repair firms to smartmoney.com: the uninsured account for almost 16% of all motorists.
Drivers desperate to lower their bills one way or another can researchinsurance quotes online to make sure they are getting the best possible deal. Those willing to take a more unconventional route can look into “pay-as-you-drive” insurance. This usage-based method of protection entails the driver installing a device into their vehicle that monitors and tracks driving habits, then feeds that information to the insurance provider who will base the rate of coverage upon an analysis of the resulting data.
According to the L.A. Times, a New Jersey software programmer by the name of Saman Jayasekara pushed aside any privacy qualms, installed the device in his vehicle and would up receiving a 23% discount each month on the auto insurance he purchases from Progressive, potentially amounting to a savings of several hundred dollars each year.
“Everybody is scared of being monitored,” Jayasekara said to the L.A. Times. “But I’m happy with my discount.”
The in-car usage-based auto insurance equipment gathers a variety of information such as when the vehicle is driven, how far, and how many sudden stops the driver makes. The tracking devices are tied into a car’s computerized diagnostic port, and cannot be used in vehicles manufactured prior to 1996, due to the fact that they are not equipped with standardized diagnostic ports.
People opposed to the tracking devices claim they are too “Big Brother-ish.” In fact, one insurance agency, State Farm, has their recording devices equipped with a GPS which they claim is used only for roadside assistance and not to gather information which is used to calculate rates.
But insurers foresee that in-car monitoring will have a positive effect on drivers, encouraging them to driver safer or less frequently which could result in fewer traffic accidents and insurance claims filed. Additionally, transportation officials and regulators are intrigued by the potential that usage-based insurance has to reduce pollution emissions and congestion.
“As a matter of public policy, pay-as-you-drive programs make a lot of sense,” said Adam Cole, general counsel of the California Department of Insurance, to the L.A. Times. “We want to create an incentive for insurance companies and consumers to participate in these programs.”
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