Economic Changes by Consumers: The Affect on Car Insurance

According to a recent article from Insurance Journal, “From changing jobs to moving to a different house to downsizing vehicles, Americans have made decisions during the recent economic downturn that impact unexpected areas of their life – like car insurance. In fact, in the past year 53 percent of Americans have made an economic-driven change that could impact the cost of their car insurance, according to a survey by state insurance commissioners.”

As stated in the article, “The National Association of Insurance Commissioners (NAIC) survey found the most common car-related, money-saving lifestyle changes consumers made in the last 12 months that could impact their car insurance were:

• Nearly 40% of respondents are driving less overall and/or taking public transportation more frequently.
• Close to 20% of car owners traded in a vehicle for a lower-priced model or got rid of a second vehicle entirely.
• Almost 20% of drivers have reduced or cancelled their car insurance for immediate financial relief.
• Many consumers relocated over the past year.

Here are the five trends and their effects on auto insurance premiums that were identified in the survey:

• Relocation
• Where insureds live can impact premium, depending on crime statistics in the area. Garage versus street parking can also impact premium.
• Moving to another state can affect costs as states vary in their minimum liability, and perhaps no-fault, coverage requirements—some allow injured parties to sue for damages and others are no-fault states.
• Changing Vehicles
• Whether purchasing a less expensive car, looking for a hybrid to save on gas, paying off a current vehicle, or purchasing a “starter” car for a teenage driver, insureds should expect car insurance rate changes. The make and model of a car affects a premium.
• A car with a lower resale value is usually cheaper to insurance because collision and comprehensive coverages cost less.
• Changing Jobs
• Some consumers now have a longer or shorter commute after turning to occupations they could do from home, or relocating a job.
• Others chose to stop payment or cancel car insurance. Causing an accident without adequate insurance protection could have devastating financial consequences in the event of an accident. Further, this decision will likely result in higher costs if insurance is reinstated in the future. When coverage is allowed to lapse, customers lose renewal/continuous coverage discounts, and when they choose to reinstate the policy, the insurer may consider them a higher risk.
• Driving Less
• Since a car insurance premium is partially based on annual mileage, driving less equals paying less. According to the NAIC survey, almost 40 percent of consumers drove fewer miles in the past year choosing instead to carpool, walk or take public transportation more frequently.
• Damaged Credit Score
• Whether consumers have fallen behind on bills or made a purchase they could not afford later, financial decisions that affect credit-based insurance scores may impact insurance rates.
• Most states allow insurers to use certain elements of credit history as one of several factors to predict the likelihood of future losses.
• Having a poor credit-based insurance score can result in higher premiums or, in some cases, the inability to secure insurance through some carriers.

For more information regarding Auto Insurance Worcester MA, give us a call today!

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