Alarming Trends in Georgia’s Auto Insurance: State Ranks Among Least Affordable in Nation
A recent report by the Insurance Research Council (IRC), a division of The Institutes, has unveiled alarming trends in Georgia’s personal auto insurance affordability. The report, titled “Personal Auto Insurance Affordability in Georgia,” highlights a significant deterioration over the past decade and a half, positioning Georgia as one of the least affordable states for auto insurance in the nation.
With below-average income and above-average auto insurance costs, Georgia has become one of the least affordable states for personal auto insurance. According to the report, personal auto insurance expenditures accounted for 2.0% of the median household income in Georgia in 2022, compared to a national average of 1.5%. This disparity places Georgia 47th in terms of auto insurance affordability, with only Louisiana, Florida, Mississippi, and New York experiencing higher expenditures.
Dale Porfilio, FCAS, MAAA, president of the IRC and chief insurance officer at the Insurance Information Institute (Triple-I), commented on the findings: “Uninsured and underinsured motorists are both a symptom and a cause of affordability issues. When affordability deteriorates, whether from increasing costs or slower income growth, increasing numbers of motorists may choose to lower the policy limits or to forgo the mandated insurance completely.”
The report identifies several key factors contributing to the affordability crisis in Georgia:
- Escalating Costs: From the mid-2000s to 2014, Georgians spent about the same on auto insurance as other Americans. However, starting in the mid-2010s, expenditures in Georgia began to escalate. Between 2014 and 2022, auto insurance spending in Georgia grew at an annualized rate of 5.6%, compared to 3.3% nationwide. By 2022, Georgia’s average expenditure reached $1,347, which is 20% higher than the U.S. average.
- Economic and Behavioral Factors: Economic inflation, high replacement costs, and poor driving behavior are cited as major contributors. Georgia also shows a higher propensity to file injury claims once an accident occurs, a greater number of underinsured motorists, and increased claim litigation.
- Legal System Abuse: The state has witnessed elevated attorney advertising rates, particularly on television, as legal firms from neighboring states seek new opportunities. This trend is potentially linked to tort reform in those states.
Rising UM and UIM Rates in Georgia Highlight Urgent Need for Policy Reforms
Porfilio further noted that the need for drivers to purchase Uninsured Motorist (UM) and Underinsured Motorist (UIM) protection has driven up average expenditures on insurance. “Both the UM and UIM rates are higher than average in Georgia. The UIM rate is especially high in the state: Georgia’s UIM rate has been increasing steadily and was the third-highest in the country in 2022.”
The findings of this report underscore the urgent need for policies and reforms to address the underlying issues driving up auto insurance costs in Georgia. As the state continues to deal with these challenges, residents face increasing financial burdens that impact their ability to maintain necessary insurance coverage.