Auto-Insurance Cost to Rise 2.8% to $839, Group Says
The cost of auto coverage for the average U.S. driver will probably climb for a third straight year as insurers charge more to boost profits pressured by record-low interest rates and increased cost from natural disasters.
Lower bond yields “imposed somewhat of a discipline” on companies, forcing them to rely on profit from underwriting policies, Keith Walsh, a Citigroup Inc. analyst, said last week. The institute said this year’s cost would still be lower than the $842 average in 2004, after the Consumer Federation of America released a survey stating that U.S. adults object to companies using clients’ education level and occupation to help set rates.
“Actuarially supported and regulator-approved rating factors used to measure risk enable auto insurers to identify safe drivers, and reward them with lower premium rates,” the industry group said in its statement. “The growing popularity of pay-as-you-drive policies, voluntary programs that allow auto insurers to monitor miles driven, promise even greater savings to safe drivers.”
Property-casualty insurers including Allstate Corp. (ALL) and Travelers Cos. are among companies seeking to raise rates for auto coverage.
The consumer group said pricing policies used with the blessing of state regulators can punish the poor.
“Low- and moderate-income families who are disadvantaged by insurer pricing policies need affordable liability coverage so they can drive legally,” said Stephen Brobeck, executive director of the CFA, in a separate statement. “The fact that these families often can’t obtain this coverage helps explain why so many risk fines, or even imprisonment, by driving without insurance.”
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