Auto insurance rates are increasing at twice the rate of inflation, according to a study by online insurance marketplace The Zebra. Premiums have reached a national average of $1,427 according to the company’s data, which the company says is a record high rate.
Rates have climbed 20 percent since 2011. In some states, rates increased by as much as 60 percent. The Zebra survey is based on an analysis of 52 million quotes generated by its comparison shopping website.
"Insurance companies leverage thousands of data points to determine car insurance rates – things like your age, driving record, and even your credit score. Today, we're also seeing extraordinary forces like overnight tech innovation and devastating natural disasters impacting rates," said Adam Lyons, founder and executive chairman at The Zebra. "Our independent research seeks to uncover the trends and forces behind these rate hikes and to help the 250 million drivers in the U.S. make informed insurance decisions about their own coverage."
Consumer credit scores play a large role in insurance rates, and the Zebra survey found that those with lower credit scores can pay as much as $1,400 more for insurance than someone with a score above 800. Unemployed drivers pay the highest rates.
The least expensive rates were found in Winston-Salem, N.C., which averaged $774. Detroit had the most expensive rates, a whopping $5,414. The most expensive states were Michigan, Louisiana and Kentucky; the least expensive states were North Carolina, Virginia and Maine.
Of the most popular cars to insure, the least expensive was the Honda CR-V, with an average rate of $1,317. Other vehicles with the lowest rates included the Honda Odyssey, Jeep Wrangler, and Jeep Renegade.
The most expensive vehicles to insure are the Mercedes-Benz E-Class CLS-Class ($3,541), Mercedes-Benz GLE-Class M-Class ($2,737), and Nissan Maxima ($2,176).
The survey also found that usage-based insurance (UBI) solutions that rely on telematics data to give insurance companies real-time information on driving habits had very little effect on rates. Participants in those programs reported an average premium of $1,415, just $12 less than the national average. Safety and anti-theft technology on the vehicle also make very little difference in insurance rates.
Among the factors that can lower your rates: being married (a savings of $80); having a PhD ($44 savings), and owning a home.
While insurance premiums have risen rapidly in the past several years, insurance companies have reported lower profits. In part, that is because the cost of crashes has been rising, there are more distracted drivers on the road, and extreme weather events have occurred over the past several years.
According to the Zebra report: “In the first half of 2017, insured property losses were 23% higher than in the first half of 2016 nationwide due to historic hail in Colorado and a number of other storms and tornadoes largely across the Midwestern states. Then, Hurricanes Harvey, Maria, and Irma, as well as the California wildfires and other events caused damage exceeding $300 billion for 2017. In fact, Hurricane Harvey alone cost 2.5 times what all of 2016’s storms did.”
Variations in state regulations can also lead to variable and higher premiums.
However, some states and consumer groups are pushing back on the use of certain demographic data on setting rates, because it penalizes lower-income drivers based on factors that have nothing to do with their driving records.
New York state, for example, has negotiated agreements with three insurers (GEICO, Liberty Mutual and Allstate) to stop using occupation and education level as factors in setting rates in compliance with new regulations.
The Consumer Federation of America also found that, despite the fact that driving fewer miles reduces your risk of filing a claim, insurance companies generally don’t offer much of a discount to low mileage drivers. Consumers save only $30 per year, or 1.6 percent, on average for every 5,000 fewer miles driven annually (excluding California drivers, who save $81 on average, or 8.7 percent).
“How well you drive and how much you drive should be the primary factors considered when insurance companies set premiums, but we have found that many companies either entirely ignore their customers’ actual mileage or give such a pittance for low-mileage as to have no meaningful impact on rates,” said J. Robert Hunter, CFA’s director of insurance and former Texas Insurance Commissioner. “For people in most parts of the country, with California as the notable exception, you’ll often pay about the same auto insurance premium whether you commute 90 miles round trip every day or if you take public transit to work and only drive on the weekends. If you drive less, you should pay less, because you can’t crash when you’re not driving.”
You can access the Zebra study here.