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A buyer's market for car insurance

Rates have fallen in California and taking advantage is easy

June 15, 2008|Marc Lifsher | Times Staff Writer

Getting too much junk mail touting low automobile insurance rates? Being bombarded by television commercials featuring a cute gecko?
Think of them as opportunities, not just irritations.
California is enjoying a buyer's market for auto insurance. And consumers can find bargains -- whether they comparison shop, pick up the phone, check out the Internet or just ask around.
"There's a lot of competition in auto insurance, and that translates into better rates and more options for the consumer," says Amy Bach, executive director of United Policyholders, a San Francisco advocacy group.
But beware: Buyers who aren't careful could also wind up paying more than twice as much as they should for the same coverage if they pick a high-cost insurance company over a low-cost one, according to an online price comparison feature sponsored by the California Department of Insurance, The site allows shoppers to input data to get a roughly individualized premium estimate.

The survey of 48 insurance companies shows that the state's major insurance companies have widely differing rates for sample policyholders. For a Culver City middle-aged male with a clean driving record and a Honda Accord, the cost for full coverage ranged from a low of $929 a year to a high of $3,709.

The site also shows estimated premiums for other types of customers, such as a single woman from Highland Park with one ticket or a senior citizen married couple from Long Beach.

The continuing drop in premiums even surprised me, a careful watcher of insurance rates.

In March, I shopped around and found a premium that was $200 less per year than the competitively priced policy I had purchased last fall.

"It's never been easier to shop," says Robert Hartwig, president and chief economist for the Insurance Information Institute, an industry-backed clearinghouse in New York.

Average auto insurance premiums in California have been dropping for years. They declined 17% between 1996 and 2006, after being adjusted for inflation, according to state regulators. Industry analysts say the trend continued through at least the third quarter of last year, though official numbers for 2007 are not yet available.

Why the dramatic plunge? Because it's been safer to drive in recent years.

The number of most types of accidents declined from 2002 to 2006. According to the California Highway Patrol, total collisions dropped by 4.7% during the five years, injury accidents fell 17.2%, and property-damage accidents were down 3.1%. The lone increase was in fatal accidents, 3.9%.

Experts credit safer cars equipped with multiple air bags and dozens of other protective features. Additionally, they point to better designed roads and bridges, new laws that limit time behind the wheel for accident-prone teenage motorists, and aging baby boomers who have become more careful drivers.

And a new law will soon take effect that could help reduce accidents further. On July 1, California drivers will be required to use a "hands-free" system whenever they use a cellphone in a moving vehicle.

While the trend overall is downward, insurers and agents say they are already beginning to see evidence that an upward tick in rates might be on the horizon, principally because of an increase in the severity of injuries from accidents and inflation in medical costs. But they say it's too early to tell whether the market will "harden" with a generalized rate increase.

While some companies recently have won Insurance Department approval to raise rates, others are still lowering premiums.

Just last week Insurance Commissioner Steve Poizner announced that Los Angeles-based Mercury General Corp., a low-cost insurer, had lowered rates 3% for its 1.5 million customers, mainly in Southern California. In all, Poizner claims to have prodded insurers into cutting auto rates by about $1 billion in 2007 and so far this year.

He predicts that more premium reductions could be on the way "because of how healthy the market is."

Mercury's policyholders, who already are struggling with steep increases in gasoline and food prices, "won't have to worry about the cost of their insurance," Mercury Chairman George Joseph said.

Even though motorists are paying more at the pump, they still might be able to keep down the cost of operating a car and lower their insurance bill by changing their driving habits. They can, for instance, avoid short trips, carpool and take public transit. Driving less lowers the statistical risk of getting into an accident, and that should mean lower insurance premiums.

"If you've stopped driving over 10 miles to work, your rates might be 15% lower," said J. Robert Hunter, the top insurance expert at the Consumer Federation of America in Washington.

Under new rules, California rates must be based mainly on a driver's safety record, years of driving experience and annual number of miles driven; not on the ZIP Code where a car is principally parked.

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