Insurance Rates Continue to Rise Despite Less Driving

It seems like a simple equation: High gas prices lead fewer people to drive, which leads to fewer accidents. Fewer accidents overall means auto insurers pay out less money, which means insurance rates should go down. This, however, has not been the case.

Even though some states have seen reductions in the cost of insurance (California), many more have seen increases (New York, North Carolina). Overall, the price of insurance is steadily trending upward, even over the past few months when Americans have been driving in significantly reduced numbers. Premiums have risen 1.7%, which is more than four times the rate of increase for the same time period in 2007.

How is it that Americans can drive less and get higher insurance premiums anyway? Insurers point to the rising cost of raw materials — everything from plastic to steel to paint — as the source of the increase, but government regulators are skeptical. States that have heavier regulation tend to deliver better prices to consumers, and these states view the insurance industry as suspect when it says it wants to raise rates (by as much as 13% in North Carolina).

Accident information for June will not be available until mid-September, but if accidents declined along with miles driven, it will be harder for insurers to justify continued price escalation.

Driving is Down, but Auto Insurance Rates are Rising (The New York Times)