Quotes vary enormously showing significant difference in risk assessment by insurers.
The Insurance Information Institute (I.I.I.) has used the findings of a recent survey to determine that American drivers in low and moderate income ranges can greatly benefit from the high level of competition in the auto insurance marketplace.
At the same time, the Consumer Federation of America (CFA) is seeking to find out why quotes vary so much.
According to the I.I.I. president, Dr. Robert Hartwig, who is also an economist, the answer to that question isn’t complicated. “The markets for auto insurance are highly competitive. In addition, the experience of insurers in these markets will differ, leading insurers to price the risk of a prospective policyholder differently.”
This was in response to the release of survey results by the CFA, which looked into whether the price quotes received by consumers within 15 American cities were at a level that the federation deemed excessive for the state mandated minimum liability coverage policies.
The CFA’s research involved a composite profile for a 35 year old woman and a 27 year old man.
Each of these profiles were for single people who had a dependent. Their incomes were similar, as were their educational backgrounds. Both profiles featured positive driving records and neither had filed any claims recently. However, both profiles experienced an extremely wide range in their price quotes for coverage. They started at less than $700, and went up to over $1,900 per year.
These quotes were generated for the state mandated minimum liability auto insurance policies. The policies were chosen to provide the minimum legal coverage allowed for what a policyholder is obligated to be able to pay should that driver cause property damage or bodily injury to another person. These types of payouts are usually notably higher in American cities than they are in either suburban or rural communities.
Dr. Hartwig also pointed out that the increases in the price of auto insurance coverage across the country are still considered to be aligned with the Consumer Price Index (CPI), having increased by less than an average of 3 percent so far this year.