Falling gas prices may be having an impact on the cost of auto insurance coverage in the United States. Earlier this year, analysts suggested that as much as $75 billion will be cut from the cost of gas by the end of this year. Drivers would be saving a total of $1 billion in fueling costs over the Labor Day weekend alone, largely due to the fact that fuel is getting less expensive. The average price of as is currently $1 per gallon less expensive than what it was last year.
More people travel as gas becomes less expensive
While gas is becoming less expensive, auto insurance is not. Some research has shown that there is a correlation between the low cost of gas and the number of traffic fatalities that occur every year. When gas prices fall, more people start driving. In some cases, this can lead to more accidents and, in the most extreme cases, more fatalities. As such, this translates into higher costs for auto insurance companies. These companies tend to raise premiums in order to recover from losses.
Both Geico and Allstate are currently raising rates for the auto insurance coverage that they provide. Allstate is looking to raise premiums by 4%, citing a higher frequency of claims and increased risks as the reason behind the rate increase. Higher premiums will help insurers better manage the risks they are beginning to see in certain markets. Growing premiums will also help insurers recover from the losses they have experienced due to the growing frequency of claims.
Fatalities are up 14%, while miles driven are up by 3%
During the first six months of this year, traffic fatalities have increased by 14%, according to a report from the Associated Press. The number of miles being driven, however, has only gone up approximately 3%. Geico believes that distracted drivers have been a major contributing factor to the increase of traffic accidents and deaths.
