Contrary to results released last week by the Consumers Federation of America, the Insurance Information Institute (III) this week found that healthy competition between insurers is making insurance more affordable for all.
Last week’s results leveled charges against top insurers like Geico and Progressive that lower-income customers were being discriminated against through “backdoor” screening questions that determine a person’s income level. The insurance industry’s response? “Your premium is based on how likely you are to get in an accident and how much that accident will cost,” said Dr. Robert Hartwig, president of the III.
A third agency, the National Association of Insurance Commissioners, has also recently released results showing that the cost to consumers of auto insurance has actually declined slightly each year since 2005. That year, the average automobile insurance policy cost $832 per vehicle. Figures for 2009, the most recent year for which data is available, show that cost has dropped to $785 in just four years. This is a nice price drop for a lot of consumers, many of whom had been opting for longer 72 month car loans just to lower their total vehicle ownership costs on a monthly basis.
It should be pointed out that if the insurance industry was purposely charging higher rates to its lower-income customers, they might be expected to look to state-sponsored programs such as the assigned-risk programs in New York. These programs, however, have floundered; and the number of drivers participating in them between 1994 and 2004 actually decreased significantly, from 4% to about 1.6%.
Anyone who’s seen any of the fiercely competitive ads on television for auto insurance knows that a customer has plenty of choices. Dr. Hartwig encourages customers to shop around if they feel their insurer is overcharging them. He adds that unlike other sectors of the financial services industry, insurers prospered throughout the recent economic downturn, continuing to add new customers as well as paying claims.