Auto insurance rates are climbing nationally, led by increases in Indiana that topped all other states, according to a report released last month by Insurance.com.
The online auto insurance agency said the lowest car insurance quotes, on average, jumped 3.4 percent, to $1,893 per year, from the first quarter to the second.
Rate increases in Indiana nearly doubled the national average, rising 6.7 percent, or $94, to $1,501. Arkansas and Rhode Island followed, with 6.1-percent and 5-percent spikes, respectively.
Sam Belden, director of consumer experience at Insurance.com, didn’t know why price increases were highest in Indiana. But he said escalating medical costs and repair expenses are leading to higher premiums. Overall, inflation is up 5.6 percent in the past 12 months, the largest yearover-year increase since 1991.
“[Insurers] don’t know how far inflation will go,” he said. “They have to follow it and catch up.”
Insurance.com’s report is based on quotes given to consumers by 15 insurance companies, including Progressive Corp., Safeco Corp. and Travelers Cos. The quotes may seem high because they typically are for more than one vehicle and are provided to consumers shopping for insurance who likely are not eligible for discounts, Belden said.
The rise in car insurance represents a reversal from flat or declining premiums in many areas the past few years, leading industry experts to question the study and its sampling size.
“It really seems preposterous to me,” said Steve Williams, president of the Insurance Institute of Indiana, “because we’re in a soft market right now.”
Excluding health care, competition is driving down insurance rates, he said. Indiana in particular is a market where consumers benefit from the large number of companies vying for business, he said.
The largest vehicle insurer in Indiana, State Farm, can attest to that. Its rates here have remained relatively steady, increasing or decreasing roughly 1 percent the past two years, company spokesman Missy Lundberg said.
When factoring rates for auto or home insurance, companies normally take a long-term approach and will not use claim activity from just one or two years.
“If we know year after year we’re paying more claims,” she said, “that’s when we might say we need to raise our rates.”
Hugh McGowan Jr., a principal of the downtown McGowan Insurance Group, an independent agency that represents several carriers, is seeing certain carriers raise their rates but not all.
“We are starting to see where, in given cases, personal auto rates are going up,” he said. “But to say it’s carte blanche across the board, that’s probably not accurate.”
At any rate, Belden at Insurance.comexpects the trend of rising insurance rates to continue at least through next year, but admitted “bargains can still be had.”
Bob Passmore, director of personal lines at the suburban-Chicago based Property Casualty Insurers Association of America, conceded that increasing costs could be affecting premiums. But he said they ultimately could stabilize if the number of traffic accidents drops as a result of motorists’ driving fewer miles.
Gasoline demand was down 2.1 percent through July as record prices and slower economic growth cut consumer spending, an American Petroleum Insti- tute report showed.
The Property Casualty Insurers Association prefers to rely on statistics provided by the National Association of Insurance Commissioners in Kansas City, Mo. According to 2005 data, the most recent available, Hoosiers paid an average of $657 annually to insure one vehicle, ranking Indiana as the ninth-cheapest state. That is a 2-percent decrease from 2004 and a 20-percent discount from the national average of $829.
At $1,184, New Jersey is the most expensive state to insure a vehicle. But Ohio-based Progressive, which participated in Insurance.com’s survey, is using modern technology to determine auto insurance bills.
Starting this month, it began offering discounts to its 127,000 drivers in New Jersey if they installed in their cars wireless devices that tell the insurer how many miles they drive, what times they’re out on the road, and how often and how fast they accelerate and hit the brakes. Progressive is dangling 60-percent discounts for the best drivers. Those with lead feet could face surcharges as high as 9 percent, however.
A spokeswoman for the New Yorkbased Insurance Information Institute told The Star Ledger in Newark that the devices are the wave of the future.