According to a recent survey by the Insurance Research Council, the three states with the most expensive personal auto insurance are Louisiana, Florida, and Michigan (IRC). According to IRC, North Dakota, New Hampshire, and Hawaii are the three most cheapest states.
Like Triple-I, a member of The Institutes, IRC bases its state-by-state affordability rankings on insurance costs as a percentage of median household income. The research uses data from the National Association of Insurance Commissioners (NAIC), but these statistics only go as far back as 2019, so they don't account for more recent events like the pandemic, the inflationary effects of supply-chain disruptions, or the conflict in Ukraine.
Prior to these incidents, the cost of auto insurance had decreased nationwide since the 1990s, when it averaged 1.9 percent of the median household income. It was down to 1.6 percent by the 2010s, and as of 2019, it was 1.56 percent.
The median household income increased by 2.9 percent yearly throughout these 30 years.
The cost of living varies greatly per state, with Hawaii having the lowest cost of living at 0.95 percent of income. Louisiana is the least affordable state, with an average expenditure-to-income ratio that is 3.01 percent, more than three times greater than the national average.
According to the report, efforts to lower these costs must concentrate on a number of important cost factors, such as accident frequency, repair costs, the relative frequency and severity of injury claims, medical utilization, attorney involvement, claim abuse, uninsured motorists, and the legal environment.
Going forward
Future trends in affordability may be impacted by how risky U.S. highways are during and after a pandemic. After decades of decline, the number of road fatalities in the United States has risen in recent years as a result of increasing speeding, drunk driving, and failure to use seat belts during the epidemic. With around 43,000 fatalities, 2021 saw the highest number of traffic fatalities in the US in 16 years.
According to Steven Cliff, administrator of the National Highway Road Safety Administration (NHTSA), "risky behaviors increased and traffic deaths spiked when daily life came to a halt in March 2020." We had anticipated that these patterns would only last through 2020, but alas, they continue.
According to NHTSA estimates, there were 9,560 traffic fatalities between January and March in 2022, a 7% increase from the corresponding period in 2021 and the bloodiest first quarter since 2002.
In states where auto insurance is the most expensive, the IRC research emphasizes the importance of legal participation in raising insurer costs and, eventually, policyholder prices. The NHTSA figures are crucial for understanding the predicted upward pressure on premium costs because bodily injury claims cases tend to involve attorneys more frequently.
All of these elements combine to raise the frequency and severity of claims, which in turn leads to higher premiums as insurers work to maintain the necessary levels of surplus to fulfill their obligations to policyholders.
