The Insurance Information Institute, more popularly identified as the III, has forecast that the auto insurance expenses for the US are going to drop in 2012. It’s apparently good news for the Americans since their expenditures on auto insurance is going to be the lowest in the last 8 years, since 2004. The experts point towards the rise in the market competition amongst the insurers as the cause behind such reduction.
Estimated Drop
The estimated amount that an average US driver spent for auto insurance coverage was supposedly around $842 in 2004. III has anticipated that in 2012, the total annual expenditure for an individual driver is going to be $839. If the inflation is taken into account, then the estimated cost for 2012 is remarkably low - around 19% less than what it had been in 2003.
Reasons Behind the Cost Reduction
The Consumer Federation of America or the CFA has imposed certain restrictions on the auto insurers. Specific rating factors have to be followed by the insurers when they determine the costs for an individual’s insurance protection. The III also foretold that if the state insurance departments were to follow the CFA imposed rules, the auto insurance expenses will again be on the rise.
The rating factors will mark the insurance applicants on how much of a risk they appear to be before the insurer. Accordingly the safe drivers will enjoy lower premium rates for their auto insurance coverage. The premium rates will also be determined on the mileage of the car per year. Thus, those who drive less miles per year will be marked as safe, and thus be able to save more on their auto insurance.
Insurance underwriting has improved a lot in the past few years at assessing risks associated with an insurance applicant. Thus, those who are deemed more risky have to pay more for their insurance, whereas the applicants with clean driving records can avail coverage at affordable rates.
The market has also evolved a lot, and as competition grows amongst the insurers, the consumers derive the benefit out of the situation. The drivers can shop around for the best deal. They can compare insurance coverage and prices and then choose one which suits his requirements and means as well. This has been identified as one significant factor that has brought about the reduction in the insurance costs in America. Another factor that might be pointed out behind the new scenario is the rise of awareness amongst the general public. Thorough understanding of how the insurance market works and the limits of necessary coverage is helpful for the consumers when they go out to buy their intended coverage.
Auto insurance is mandatory to protect the individuals in most of the states. Apart from New Hampshire, every other US state requires the licensed drivers to have liability coverage. The minimum insurance requirements as fixed by the respective states have to be followed by all the vehicle owners. The drop in the insurance costs is thereby helpful for a large section of the US population, or rather, for anyone who owns and drives a car.
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