Source:
National
Association
of
Insurance
Commissioners.
Reprinted
with
permission.
Further
reprint
or
redistribution
is
strictly
prohibited
without
written
permission
of
NAIC.
The
average
expenditure
for
auto
insurance
rose
7.5
percent
in
2002,
following
a
4.8
percent
rise
in
2001.
The
Insurance
Information
Institute
estimates
the
average
expenditure
for
auto
insurance
rose
by
7.8
percent
in
2003
and
2.8
percent
in
2004.
It
projects
a
1.5
percent
increase
in
2005,
the
smallest
increase
in
five
years.
The
slowdown
in
auto
insurance
expenditure
increases
in
2004
and
2005
result
from
the
declining
number
of
crashes,
safer
cars,
new
auto
theft
technology
and
fraud-fighting
efforts.
Rising
costs
for
medical
care
and
vehicle
repairs
and
higher
jury
awards
continue
to
drive
up
the
cost
of
auto
insurance.
AUTO
INSURANCE
EXPENDITURES,
BY STATE
The
following
table shows
estimated
average
expenditures
for private
passenger
automobile
insurance by
state for
1998 to
2002,
providing
approximate
measures of
the relative
cost of
automobile
insurance to
consumers in
each state.
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 where
the economy
is healthy,
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
urban
population,
traffic
density, and
per capita
income have
a
significant
impact on
premiums.
The latest
report shows
that high
premium
states tend
to also be
highly
urban, with
higher wage
and price
levels and
greater
traffic
density.
Tort
liability
and other
auto laws,
labor costs,
liability
coverage
requirements,
theft rates
and other
factors can
also affect
auto
insurance
prices.
AVERAGE
EXPENDITURES
FOR AUTO
INSURANCE BY
STATE,
1998-2002
(1)
Ranked
by
average
expenditure.
(2)
Preliminary.
(3)
The
District
of
Columbia
and
New
Jersey
are
entirely
urban
and
their
results
cannot
be
directly
compared
to
states
with
rural
areas.
(4)
Data
incorporates
Safe
Driver
Plan
credits
and
surcharges.
(5)
Historically,
New
Jersey
has
paid
2 to
4
times
the
national
average
in
dividends
to
policyholders,
and
at
times
as
high
as 6
times
the
national
average,
which
reduces
the
average
expenditure
paid
by
New
Jersey
policyholders.
(6)
Due
to
the exclusion
of
county
mutuals,
which
had
37
percent
of
the
market
in
2002,
Texas
results
are
not
comparable
to
results
from
other
states.
Note:
Average
Expenditure=Total
premiums
written/Liability
Car-Years.
A
car-year
is
equal
to
365
days
of
insured
coverage
for
a
single
vehicle.
Source:
Reprinted
with
permission
from
State
Average
Expenditures
and
Premiums
for
Personal
Automobile
Insurance
in
2002,
published
by
the
National
Association
of
Insurance
Commissioners.
Further
reprint
or
redistribution
strictly
prohibited
without
written
permission
of
NAIC.
AVERAGE
EXPENDITURES
FOR AUTO
INSURANCE BY
STATE,
1998-2002
(1)
Ranked
by
average
expenditure.
(2)
Preliminary.
(3)
The
District
of
Columbia
and
New
Jersey
are
entirely
urban
and
their
results
cannot
be
directly
compared
to
states
with
rural
areas.
(4)
Data
incorporates
Safe
Driver
Plan
credits
and
surcharges.
(5)
Historically,
New
Jersey
has
paid
2 to
4
times
the
national
average
in
dividends
to
policyholders,
and
at
times
as
high
as 6
times
the
national
average,
which
reduces
the
average
expenditure
paid
by
New
Jersey
policyholders.
(6)
Due
to
the exclusion
of
county
mutuals,
which
had
37
percent
of
the
market
in
2002,
Texas
results
are
not
comparable
to
results
from
other
states.
Note:
Average
Expenditure=Total
premiums
written/Liability
Car-Years.
A
car-year
is
equal
to
365
days
of
insured
coverage
for
a
single
vehicle.
Source:
Reprinted
with
permission
from
State
Average
Expenditures
and
Premiums
for
Personal
Automobile
Insurance
in
2002,
published
by
the
National
Association
of
Insurance
Commissioners.
Further
reprint
or
redistribution
strictly
prohibited
without
written
permission
of
NAIC.
LEADING
WRITERS OF
PRIVATE
PASSENGER
AUTO
INSURANCE,
2003
(1)
Includes
theft
and
damage
to
other
property,
e.g.,
road
signs.
(2)
Includes
interest,
dividends,
and
realized
capital
gains.
Source: Insurance Information Institute
based
on
data
from
ISO;
National
Association
of
Insurance
Commissioners;
Insurance
Research
Council;
A.M.
Best
Company,
Inc.
In
2003,
claims
accounted
for
$76
of
every
$100
earned
in
private
passenger
auto
insurance
premiums
in
the
United
States.
Lawyers’
fees
accounted
for
$12
out
of
every
$100
in
premiums.
Of
this,
half
went
to
plaintiffs’
attorneys
and
the
remainder
to
defendants’
attorneys.
Theft
accounted
for
about
25
percent
of
the
dollars
that
go
to
pay
comprehensive
claims,
or 2
percent
of
premiums
earned
for
private
passenger
auto
insurance.
VEHICLES
INSURED, BY
STATE SHARED
MARKET
All states
and the
District of
Columbia use
one of four
systems to
guarantee
that auto
insurance is
available to
those who
cannot
obtain it in
the private
market. All
four systems
are commonly
known as
assigned
risk plans,
although the
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, as the
name
suggests,
assigned to
various
insurance
companies
doing
business in
the state.
Hence the
term
voluntary
(regular)
market,
where auto
insurers are
free to
select
policyholders
rather than
have them
assigned.
THE
NONSTANDARD
AUTOMOBILE
INSURANCE
MARKET
The
percentage
of vehicles
insured in
the shared
market is
dropping, in
part because
of growth in
the
nonstandard
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
small
specialty
companies,
whose only
business is
the
nonstandard
market, and
well-known
auto
insurance
companies
with
nonstandard
divisions.
Up to 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.
Then, in the
1970s and
1980s, when
the passage
of
compulsory
auto
liability
insurance
laws in many
states
brought more
poor drivers
into the
marketplace
and
expertise in
nonstandard
auto
insurance
underwriting
had grown,
more
companies
entered the
business. By
the late
1990s, the
nonstandard
market
accounted
for about
one-fifth of
the total
private
passenger
auto
insurance
market.
PRIVATE
PASSENGER
CARS INSURED
IN THE
SHARED AND
VOLUNTARY
MARKETS,
2002
(1) Estimated.
(2) Shared and voluntary market data are not available for Texas.
Source: Automobile Insurance Plans Service Office.
In
2002
(latest
data
available),
169
million
vehicles
were
insured
in
the
United
States,
excluding
Texas.
Of
that
number,
only
2.7
million,
or
1.6
percent,
were
insured
in
the
shared
market.
In
2001,
1.5
percent
of
all
insured
vehicles
were
in
the
shared
market;
in
1993,
the
figure
was
4.1
percent.
In
South
Carolina,
cars
insured
in
the
shared
market
fell
from
31,734
to
3,687
vehicles,
down
88
percent,
mostly
as a
result
of
changes
in
insurance
laws.
States
with
significant
increases
in
the
number
of
vehicles
in
the
shared
market
from
2001
to
2002
are
New
York
and
New
Jersey.
In
New
York,
73,785
more
vehicles
were
insured
in
the
shared
market,
up
18
percent;
in
New
Jersey,
29,237
additional
vehicles
were
in
the
shared
market,
up
29
percent.
Uninsured
motorist
rates
are
much
higher
in
cities
than
in
rural
areas.
Twelve
percent
of
households
have
at
least
one
uninsured
vehicle,
based
on
responses
to
the
Insurance
Research
Council
(IRC)
2001
Public
Attitude
Monitor
survey.
Another
2001
IRC
study,
based
on
an
analysis
of
claims,
estimated
that
14
percent
of
drivers
are
uninsured.
(1)
For
all
limits
combined
and
including
all
loss
adjustment
expenses.
For
bodily
injury
liability,
dollar
averages
exclude
Massachusetts
and
most
states
with
no-fault
automobile
insurance
laws.
For
property
damage
liability,
dollar
averages
exclude
Massachusetts,
Michigan
and
New
Jersey.
Source:
ISO.
Bodily
injury
liability
costs
have
fluctuated
over
the
past
decade,
while
property
damage
liability
costs
have
steadily
increased.
(1) For all
limits
combined and
including
all loss
adjustment
expenses.
For bodily
injury
liability,
dollar
averages
exclude
Massachusetts
and most
states with
no-fault
automobile
insurance
laws. For
property
damage
liability,
dollar
averages
exclude
Massachusetts,
Michigan and
New Jersey.
Source: ISO.
Recent
increases
in
bodily
injury
claim
costs
reflect
higher
hospitalization,
pharmaceutical
and
legal
costs.
Higher
vehicle
repair
costs,
reflecting
insurers’
reduced
use
of
generic
crash
parts,
is a
factor
in
the
increase
in
property
damage
claim
costs.
COLLISION
LOSSES
The
following
table shows
the claim
frequency,
average loss
payment per
claim, and
average loss
payment per
insured
vehicle year
under
collision
coverage for
recent model
vehicles.
The last
item factors
in both
claim
frequency
and the
average loss
payment per
claim. This
combination
is a
measurement
of both how
often
collision
claims are
filed and
the
magnitude of
those
claims.
The claim
frequency is
expressed as
a rate per
100 insured
vehicle
years. A
vehicle year
is equal to
365 days of
insurance
coverage for
a single
vehicle.
COLLISION
COVERAGE
INSURANCE
LOSSES IN
YEARS SINCE
INTRODUCTION,
2001-2003
MODEL YEAR
PASSENGER
VEHICLES
