Insur.com has new data on an interactive application “that ranks the states according to their average insurance rates” and Yahoo Finance had the New York Times story, Where Auto Insurance Is Most Expensive:
Louisiana has the highest average auto insurance rates in the United States, while Maine has the lowest, according to new data from Insure.com that ranks the states according to their average insurance rates. (ranked list below the jump)
The data…comes from a study Quadrant Information Services performed for Insure.com to find the most and least expensive vehicle to insure nationwide, which we covered in a March Bucks post. The data, which determined average insurance premiums rates for more than 2,400 vehicles from the 2010 model year from six large carriers across 10 ZIP codes in each state, also enabled a comparison of auto insurance rates in general across the states.
What’s behind states’ different rates?
According to Insure.com, states’ different laws are partly to blame. “Our findings show that the financial ramifications of specific state laws and regulations are driving high rates in certain states,” Amy Danise, senior managing editor of Insure.com, said in a statement. “No matter how good your own driving record is, you’re paying for the decisions of lawmakers.”
Insure.com discovered from talking with insurance agents that the states at the top of the list have certain regulations that drive up rates in those states…In contrast, population levels may be why certain states are at the bottom of the list. According to Ms. Danise, the states with the lowest insurance costs tend to be more rural. Maine, for instance, may have low auto insurance rates because its highways are less crowded, which may mean fewer crashes over all.
According to Insure.com’s website, “only cases with claims in excess of $50,000 receive a jury trial…in Louisiana.”
When asked about Louisiana’s No. 1 ranking, two insurance agents there said they were disappointed but not surprised. And they had a ready explanation: the state’s court system.
“You see lots of settlements at $49,000,” explains Duane Dimattia of Baton Rouge, a director of the Professional Insurance Agents of Louisiana. That sweetens the pot for seeking a claim against an at-fault driver – and insurance companies pay the tab.
With the state’s judges elected rather than appointed, those settlements tend to cater to the public more than they do to legal facts, asserts Richard Clements, a past president of the Independent Insurance Agents of Greater New Orleans.
While an estimated 125,000 vehicles were crushed at Louisiana junkyards in the wake of 2005’s Hurricane Katrina, Clements says that’s not a factor in the state’s high rates. “We really can’t point our finger at Katrina on that, even though we can point to it for many other things.”
In addition to the monetary threshold for jury trials, Dimattia says, Louisiana has traditionally had higher bodily injury rates and more lawsuits per capita than most states. He blames both on the state’s aging roads.
Michigan is in second place on the ranked list of state auto insurance rates:
Like many states, Michigan requires all drivers to have car insurance. Unlike any other state, it offers unlimited medical benefits for the life of accident victims — no matter what policy they buy. Under the system, an individual’s insurance carrier covers the first $460,000 in benefits. Above that amount, a statewide pool (called the Michigan Catastrophic Claims Assessment) kicks in, which affects the rates of everyone in the state.
“That’s where our biggest expense is,” explains Jon Spalding of Perry, Mich., president of the National Association of Professional Insurance Agents . “If I’m sitting at a stop sign and a motorcycle rear-ends me, my auto policy pays for that motorcyclist’s medical benefits.”
In fact, because of this personal injury protection (PIP) coverage, car insurance has become the primary source of medical coverage, says Spalding.
Michigan’s unemployment rate of nearly 15 percent, the highest in the nation, also plays a role in the state’s car insurance rates. More and more residents are letting their car insurance lapse despite the mandatory coverage law. “It’s a gamble and it can be an expensive one if they get caught,” says Spaulding. But “they’re absolutely willing to take that risk.”
Maine, “a large rural state with just 1.3million residents” has the nation’s lowest rate:
The largest city, Portland, has just 62,000 residents. The upshot: The average number of annual miles driven is low, commuter mileage is low, and, relative to other states, the Pine Tree State’s highways are not that busy. This helps hold down car crash claims.
Despite its small population, Condon notes that there are at least 30 insurance carriers in the state, so there’s plenty of competition for customers’ business.
But Condon says Maine’s insurance advantage goes beyond just numbers. “It’s a real proud culture,” he explains. In most disputes, Mainers tend to seek fair treatment rather than big money.
Before you let the cost of auto insurance cause you to consider building “a bar in the back of your car”, read more about the ranking and check out the inactive rate comparison tool (toy) at Insure.com.