Increase in auto insurance premiums smallest in six years

by Center for Personal Finance editors

NEW YORK (5/11/06)--With the high cost of gasoline taking a bigger chunk of budgets these days, there's welcome news from the Insurance Information Institute: The increase in auto insurance premiums is the smallest in six years (Insurance Information Institute May 3).

The report issued last week estimates that auto insurance premiums are expected to increase a mere $4 per vehicle from last year, despite record-setting losses from hurricanes. The average cost for auto insurance nationwide for 2006 is estimated at $867 and is increasing by about one-sixth the rate of inflation.

The $4 increase--or 0.5% from last year--follows a 2.5% increase in 2005. And for drivers with a clean driving record who keep the same car, prices actually may go down by around $25 to $50 (The Wall Street Journal May 4).

Reasons behind the cost slowdown include declining number of accidents, safer cars, new auto theft technology, fraud-fighting efforts, and graduated licensing laws for teen drivers. On the other hand, rising costs for medical care and vehicle repairs, as well as large jury awards, continue to push costs upward.

Besides driving responsibly and maintaining a ticket-free record, pay all your bills on time. Your credit score--a fairly accurate predictor of future loss, according to the Insurance Information Institute--is used in many states to help determine insurance rates.