Hey, Low Risk Driver: Are You Paying Too Much For Auto Insurance?

AAA’s annual Your Driving Costs brochure found that a low-risk driver with a clean driving record can expect to pay $1,001 a year for insurance on a sedan this year. This week, the Consumer Federation of America found that moderate-income individuals with clean driving records were being quoted high rates for minimum liability auto insurance coverage.

How Much Are We Paying For Auto Insurance?

According to the CFA, four companies — State Farm, Allstate, Progressive and GEICO — have 48 percent of the car insurance industry nationwide. In their research, they looked up what a 27-year-old male laborer and a 35-year-old female bank teller with perfect driving records and decent credit would pay. They drove paid-for 2002 Honda Civics 10,000 miles per year and made over $30,000 a year. They found:

  • 56 percent of the auto insurance rate quotes were over $1,000.
  • 32 percent of the auto insurance rate quotes were over $1,500.

Worst of all, quotes to the same woman from four auto insurers ranged from $762 to $3,390!

What’s Going On?

Insurers argue that their rates reflect risk and cost, but it’s hard to justify rate fluctuations that are off by thousands of dollars. The Insurance Information Institute believes that the highly competitive auto insurance industry leads insurers to price however they choose in the open market economy. The III added that city-dwellers can expect to pay higher premiums because theauto insurance claims payouts are generally higher.

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