As auto insurance has become increasingly commoditized, price has become a key factor in the decisions consumers make. However, two recent research group reports differ on whether that price has fluctuated positively.
The first, a study from the Insurance Research Council, asserts that in all but six states, consumers in the middle- to low-income bracket are experiencing an improvement in auto insurance affordability.
In the IRC report, researchers concluded that the ratio of average auto insurance expenditures to median income fell by more than 9.5% from the 1990s to the 2000s, “indicating a strong improvement in affordability from decade to decade for those in the lowest-income quintile.”
“The long-term trend of improving affordability is evident,” the IRC said.
The ratio improved in all states but Alaska, Florida, Louisiana, Michigan, Montana and Wyoming, the report concluded. Even in the lowest-income quintile, the IRC found 20-year lows for the auto insurance to median income ratio.
The IRC attributes the positive trends to increased competition, government regulation, few uninsured motorists and the improved unemployment rate.
“More affordable auto insurance was found to be associated with more competitive auto insurance markets, less government regulation, smaller residual markets, less rich compensation for injuries, fewer uninsured motorists and lower unemployment rates,” the study said.
However, the research contradicts earlier findings from the Consumer Federation of America, which suggest that auto insurance expenditures actually rose an average 43% over the past 25 years. The CFA expressed concern that lower income families may not be able to meet minimum insurance requirements due to the sharp increase in costs.
“These escalating rates, which are made worse by the use of non-driving rating factors by major insurance companies, limit the ability of low- and moderate-income drivers to comply with state insurance requirements,” the report said.
The CFA report analyzed data collected by the group over the years, while the IRC looked at auto insurance expenditure data from the National Association of Insurance Commissioners and income data from the US Census Bureau. The reports also differed in their scope: while the IRC report looked at data from the 1990s onward, the CFA report analyzed trends dating back to the late 80s.
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