Originally published June 29 2005
Car insurance rates drop after a long series of increases
by Mike Adams, the Health Ranger, NaturalNews Editor
Between 2000 and 2004, the average insurance policy rose from $687 to $857 annually per vehicle, but 10 big auto insurers have recently cut rates an average of 5 percent to 6 percent this year.
Melissa Senatore watched helplessly as the insurance premium for her family's five vehicles -- including a 2003 Jaguar and her teenage son's 1999 Ford Mustang -- climbed by a few thousand dollars in recent years.
Between 2000 and 2004, drivers endured nearly 6 percent average increases a year for the cost of auto insurance -- jacking the average policy from $687 to $857 annually per vehicle.
But this year insurance companies are throttling back on rate increases, and premiums are even declining for many drivers.
A steady decline in car accidents and savvier risk-management techniques are allowing insurers to pass savings along to policyholders, while simmering competition has put pressure on prices.
"The market for auto insurance is becoming very competitive," said Robert Hartwig, chief economist at the Insurance Information Institute.
In New York, 10 big auto insurers -- including market leaders AllState, GEICO Corp. and State Farm Insurance Co. -- have cut rates an average of 5 percent to 6 percent this year, saving New York drivers nearly $350 million.
State Farm, the nation's largest auto insurance underwriter with about 19 percent market share, says it has dropped prices in 32 states this year while raising them in just one: North Dakota.
While the recent price reductions have left healthy margins, observers fear they could signal the market is topping out.
"The insurance cycle has been very strong the last several years.
It's just not going to last," said Matt Nellans, an analyst at Morningstar.
"I think we're coming into a market where some companies will just slash prices to gain policyholders."
Indeed, insurers lost billions during a four-year span in the late 1990s, when premiums were stagnant.
By 2000, insurers were paying out $1.10 in claims and expenses for every $1 in premiums, in a misguided attempt to retain market share.
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