Insurance.com Reports Auto Insurance Rates Grow

For the first time in a year, car insurance rates are on the rise, according to a study by Insurance.com. The company expects auto insurance rates to continue to move up at least through 2008, which means consumers will need to be even more savvy shoppers as they try to keep their car insurance rate low.

The study analyzed lowest auto insurance quotes to consumers from more than a dozen insurance companies during the first quarter. Insurance.com’s quarterly Car Insurance Rate Report found that the lowest car insurance quotes, on average, increased 1.05% over the previous quarter, rising from $1811 per year to $1830 per year. This increase marks the first time in a year that rates have inched up. Rates fell or held steady in 2007, marked by a 5.2% decrease in auto insurance rates in fourth quarter compared to the same period the year before.

Car insurance rates vary by state, and some states experienced rate quote increases in the first quarter that were many times greater than the average. Florida and Ohio, for example, saw rates jump 6.6% and 4.8%, respectively.

“While some of the rate increases we are seeing in the first quarter are relatively small, they represent a turning point for auto premiums, which had been holding steady or declining over the past four quarters,” said Dave Roush, CEO of Insurance.com. “We have seen all of the major auto insurance carriers reporting an increase in the average amount paid on bodily injury claims, fueled by rising medical costs. Historically, this factor has signaled the beginning of a national upward trend in rates, and we think we’ll continue to see rates bump up through 2008 and maybe into 2009.”

To be sure, individual states, companies or industry groups might report annualized increases that are still quite small, as their data reflects the past 12 months, when rates fell or held steady. The Insurance.com data, however, is real-time, representing the real-world experience of consumers who have gotten an online or phone quote for auto insurance in the last 3 months.

Industry experts have long observed that the property/casualty industry is cyclical in nature, with periods of soft market conditions, during which premium rates are stable or falling and insurance is readily available, followed by periods of hard market conditions, where rates increase and coverage may be more difficult to find. The last time the auto insurance industry experienced such a challenging market, characterized by increasing rates, was from 2001 through 2004.

Additional Findings

• Among the top 10 states seeing the sharpest increase in car insurance rates in the 1st Quarter were Florida (up 6.6%), Ohio (up 4.8%), Pennsylvania (up 4.2%), Georgia (up 3.2%) and Texas (up 2.4%).
• States seeing the sharpest decline in auto rates include Kentucky (down 7.6%), Maine (down 5.5%) and North Dakota (down 4.3%).
• The most expensive auto insurance quotes were in Louisiana ($2674), Washington, DC ($2515), and New Jersey ($2499). These annual rates were twice as high as those quoted to drivers in Wisconsin ($1237), Iowa ($1276) and Ohio ($1278).