Auto Insurance: Statistics And Loss

Auto insurance statistics provide insight into the frequency and cost of vehicle collisions, repairs, and insurance claims. In the United States, the average yearly cost of auto insurance is $1,771, with nearly 215 million drivers carrying car insurance. The cost of insurance is influenced by various factors, including age, gender, driving history, and location. Insurance losses tend to be higher for larger vehicles due to their higher price and repair costs, while smaller vehicles often have lower losses. Understanding these statistics is crucial for policyholders to make informed decisions and for insurance companies to assess risks and set premiums.

Average auto insurance costs

The average cost of car insurance varies depending on the level of coverage, the state, and individual factors such as age, gender, driving history, and credit score.

Average Cost of Car Insurance by Coverage Level

The average cost of car insurance in the US for a minimum-coverage policy is $767 per year, or $64 per month. In contrast, a full-coverage policy costs $1,718 per year, or about $143 per month, on average.

Average Cost of Car Insurance by State

The cost of car insurance also varies significantly by state. Louisiana has the most expensive car insurance, with an average annual premium of $2,883 for full coverage. In contrast, Maine has the cheapest car insurance, with an average annual premium of $1,175 for full coverage.

Average Cost of Car Insurance by Individual Factors

Several individual factors can also impact the cost of car insurance. For example, young and inexperienced drivers typically pay higher rates, with 18-year-olds paying more than three times as much as 30-year-olds. Additionally, male drivers under 20 years old pay 10% more than female drivers of the same age.

Driving history also plays a crucial role, with rates increasing by 49% after an at-fault accident and by 83% after a DUI. Credit score is another factor, with drivers with good credit paying 46% less than those with poor credit.

Factors influencing insurance costs

Several factors influence car insurance costs, and they can be placed into different categories.

Driver-Related Factors

The age of the driver is a significant factor, with younger and less experienced drivers paying higher insurance rates. This is because they are more prone to accidents, with drivers between 16 and 19 being three times more likely to be involved in a fatal crash than drivers over 20. Additionally, gender plays a role, with young male drivers deemed to be at the highest risk of vehicle damage and accidents, resulting in higher insurance costs.

The driver's history is also crucial, as it provides insights into their driving habits and experience. A history of tickets, sanctions, and violations will lead to higher insurance fees. A driver's credit history and score are also considered, as data shows that drivers with poor credit tend to file more expensive claims.

The driver's marital status is another factor, with married drivers considered more financially stable and safer on the road, resulting in lower insurance rates. The driver's occupation is also taken into account, with low-risk occupations often receiving insurance discounts, while high-risk jobs, such as Uber drivers, may pay higher premiums.

Vehicle-Related Factors

The type of car driven is significant, with insurance companies considering engine size, theft rates, vehicle cost, size, and type when setting rates. More expensive cars with larger engines tend to have higher insurance rates as they are costlier to repair and replace, and drivers of such vehicles are more prone to accidents due to higher speeds.

The vehicle's model and production year are also considered, as newer cars may have more advanced safety features, which can reduce premiums. However, they may also have higher-tech parts that are more expensive to replace.

Location-Related Factors

The driver's location can impact insurance rates due to factors such as weather claims, accidents, and car theft. Those in metropolitan areas tend to pay more for coverage than those in suburban areas due to higher theft and accident rates.

Policy-Related Factors

The coverage level chosen will significantly impact the cost, with higher coverage resulting in higher insurance rates. Additionally, the type of ownership, such as whether the vehicle is leased, financed, or owned, can affect the required insurance coverage.

The insurance company's policies and discount options will also influence the cost, as each company has its own internal regulations and factors that it considers when setting rates.

Other Factors

The driver's education level can also be a factor, with studies showing that drivers with advanced education levels are less likely to file claims.

Finally, the driver's homeownership status can influence rates if the same company handles their auto and home insurance. Insurers consider homeowners more stable and, therefore, offer them lower premiums.

Insurance claim types

There are several types of insurance claims, which can be broadly categorized into first-party claims and third-party claims.

First-Party Insurance Claims

First-party insurance claims are filed by the policyholder or the individual who is insured directly with the insurance company. This could be for health insurance, homeowner's insurance, or car insurance. For example, if a policyholder experiences an illness or injury, or incurs damage to an insured piece of property, they can submit a first-party claim for payment or reimbursement.

Third-Party Insurance Claims

Third-party insurance claims are filed by someone other than the policyholder, typically with another person's insurance company. For instance, if you are in a car accident, you may file a third-party claim against the other driver's insurance company. Similarly, if you are injured while visiting someone else's home, you would file a third-party claim with the homeowner's insurance company.

Car Insurance Claims

Car insurance claims can be either first-party or third-party claims. They are filed when an individual wants to be compensated for damages to their car, such as repair or replacement of the vehicle, robbery, vandalism, or hailstorms.

Health Insurance Claims

Health insurance claims are filed when an individual wants reimbursement for their insured medical care. In many cases, the medical professional will submit the claim without the patient's direct involvement.

Homeowner's Insurance Claims

Homeowner's insurance claims are filed when an individual wants their insurance company to cover damage to their home and property. This could include damage from hail, wind, natural disasters, theft, or vandalism.

Natural Disaster Insurance Claims

Natural disasters, such as floods, earthquakes, hurricanes, and storms, are not always covered by homeowner's insurance policies. Individuals may need to purchase separate natural disaster insurance to cover damage caused by these events.

Total loss claims

A total loss claim is when an insured property is damaged beyond repair. In the context of auto insurance, a vehicle is considered a "total loss" when the cost of repairing the vehicle is higher than the actual cash value (ACV) of the vehicle. The ACV is determined by taking the replacement value of the car and then subtracting the depreciation or "wear and tear costs".

The process of filing a total loss claim begins with contacting your insurer, who will send a claims adjuster to inspect the vehicle and assess the damage. If the adjuster determines that the cost of repairing the vehicle exceeds its ACV, then it is considered a total loss. The specific criteria for what constitutes a total loss vary among states, with some using a "total loss threshold" (TLT) and others employing the "total loss formula" (TLF).

Once a vehicle is deemed a total loss, the insurance company will pay the policyholder the fair market value of the vehicle as of the day of the accident. If the vehicle is leased or financed, the compensation will go to the leasing or financing company. It is important to note that the insurance company is only required to pay the fair market value, even if the policyholder owes more than the car's value on their loan.

If you disagree with the assessment of your vehicle as a total loss, you may negotiate with the claims adjuster by providing documentation and proof that the vehicle is worth more than determined. Alternatively, you may seek legal assistance if you feel you are not adequately compensated.

In the event that you wish to keep the totalled vehicle, for example, due to sentimental reasons or for repairs, your insurance company may allow it. However, you will receive a reduced payout, which is the ACV minus the value of the car as salvage. It is worth noting that some states may prevent drivers from retaining total loss vehicles, while others may require obtaining a certificate stating that the car is salvaged.

Insurance loss ratios

The loss ratio is a metric used to evaluate the financial health and profitability of an insurance company. It is calculated by dividing the sum of insurance claims paid and loss adjustment expenses by the premium earned, and then multiplying that figure by 100. The loss ratio is used by both insurers and external parties, such as regulators, lenders, and consumer advocates, to monitor and assess the performance of insurance companies.

The loss ratio specifically measures the profitability of insurance companies by revealing how much they have spent on paying claims and other expenses compared to the premium received. A loss ratio of less than 100% indicates that an insurance company is profitable, as it means that they have kept a portion of their premium after claims have been paid. A loss ratio of 100% means that the company is neither making profits nor losses from its policies, while a loss ratio of more than 100% indicates that the company is losing money on its policies and is at risk of going out of business.

For example, if an insurance company earned $100 million in premiums from clients in a year, and paid out a total of $60 million in claims and an additional $5 million in adjusting claims, the loss ratio would be calculated as ($60,000,000 + $5,000,000) / ($100,000,000) x 100, which equals 65%. This means that the insurance company used 65% of its premiums to pay for claims.

It is important to note that the loss ratio does not include all expenses incurred by an insurance company. Other expenses, such as agent's sales commissions, salaries, overhead expenses, and marketing expenses, are not reflected in the loss ratio but are included in the expense ratio. Therefore, the loss ratio should be used in conjunction with the expense ratio to determine a company's true profitability.

The Affordable Care Act, for instance, requires health insurance issuers to submit data on the proportion of premium revenues spent on clinical services and quality improvement, known as the Medical Loss Ratio (MLR). If the MLR does not meet the minimum standard of 80% or 85%, the issuer is required to provide rebates to its customers.

Frequently asked questions