Auto Insurance Rates Stable Due To Fewer Accidents, Safer Cars, Less Fraud and Theft

The cost of auto insurance is expected to rise by just 0.5 percent this year, the smallest increase in six years, reports the Insurance Information Institute.

The average cost for auto insurance nationwide for 2006 is estimated at $867, an increase of just $4 per vehicle from last year, despite record vehicle-related losses arising from the 2005 hurricane season, the institute says. The projected increase represents a continued slowdown from 2005 when auto insurance costs rose by 2.5 percent.

“The cost of auto insurance is increasing by about one-sixth the rate of inflation and little more than a single gallon of gasoline,” says Robert Hartwig, senior vice president and chief economist of the institute.

“Many people who, for example, drive safe cars, have excellent safety records, and good credit-based insurance scores may see their rates go down, often by 3 percent to 5 percent or about $25 to $50 per vehicle. This is welcome news for drivers who have been battered by record high gas prices over the past year,” Hartwig says.

What’s more, he says, people who trade in their expensive gas-guzzlers for smaller, more fuel efficient, and less expensive vehicles may see even lower insurance costs in many cases. Smaller cars that cost less with fewer horsepower are often less expensive to insure because repair costs are less. Some insurers now even offer discounts for hybrid vehicles. It also might pay to leave the car at home.

“People who make the switch to public transportation may also qualify for lower insurance premiums if they no longer use the vehicle commuting and drive it significantly fewer miles each year,” says Hartwig.

Key factors contributing to the overall cost slowdown, he says, are a declining number of auto accidents, safer cars, new auto theft technology, fraud-fighting efforts, and graduated licensing laws for teen drivers. He adds, though, that rising costs for medical care and vehicle repairs as well as defense costs and jury awards remain a problem, according to the institute’s analysis.