Auto Insurance Rates Increasing at 2x Inflation Rate

With the economy still sputtering like an  old car on a cold winter morning, most costs remain low, except insurance. The chart attached shows the auto insurance rates increasing at two-times the inflation rate, based on the Consumer Price Index (CPI), over the last two years.

Auto Insurance Rates Increasing Defies Logic

The following trends should lead to lower auto insurance costs:

• Significantly fewer miles driven due to the slow economy. According to the Business Insider, who gets their data from the Department of Transportation, miles driven is down 8.9% from 2005. This directly benefits auto insurance companies due to the reduction in the number of accidents when miles driven is reduced.
• The slow economy has led to an increase in the average age of the automobiles on the road, resulting in a lower cost of repairs when accidents occur. This change is dramatic. According to the Automotive News, the age of vehicles is now at a record 11.4 years, on average.
• For those people that are buying new vehicles, the new cars enjoy Improved safety, reducing the severity of accidents.

Despite these trends that should result in rate reductions, instead auto insurance rates are increasing at double the rate of inflation for the last two years. In 2012 the inflation rate was 1.7% according to the Consumer Price Index (CPI), while auto insurance rates increased  3.7% according to Perr & Knights RateWatch. In 2013 the CPI calculates inflation at 1.5% and Perr & Knight state auto insurance rates increased at 2.5%. 

Consumers taking action through Injured Money

Why do rates continue to spiral upward when costs are declining? This is a question Injured Money intends to get to the bottom of. Follow Injured Money through your favorite social media network (like our Facebook page and follow us on Twitter and Linkedin) and sign up for email newsletters so you can receive the latest information benefiting people who own insurance.

According to Perr & Knight, the firm accumulates approved rate changes extracted from public rate filings of companies representing about 80% of personal insurance premiums written.