While it’s widely understood that the fortunes of the insurance industry are intrinsically linked with the economy at large, a new study the National Association of Insurance Commissioners (NAIC) quantifies that connection.
In an April 2011 survey of 1,010 consumers in the U.S., the NAIC found that the nation’s weak economy has driven changes for 53% of Americans that could impact the cost of their car insurance.
The study found that nearly 40% of respondents are driving less overall or taking public transportation more frequently. Also, close to 20% of car owners traded in a vehicle for a lower-priced model or got rid of a second vehicle entirely.
That comes as the average price of a gallon of gas has risen from $2.60 a gallon on June 6, 2009, to $3.78 a gallon, on June 6, 2011, according to the American Automobile Association and the Energy Information Administration. The nation’s unemployment rate in May was 9.1 percent, the same as in May 2009, according to the Bureau of Labor Statistics.
More pointedly, the study confirmed that many drivers were under-insuring their vehicles or forgoing coverage altogether. Indeed, almost 20% of drivers have reduced or cancelled their car insurance coverage for immediate financial relief.
NAIC President and Iowa Insurance Commissioner Susan Voss says some consumers don’t realize the devastating economic consequences they may face if they are found to be at-fault in an accident while being uninsured.
“When determining where to cut spending now, it’s important to consider the big picture,” Voss said. “Some changes will save in unexpected ways, while others may increase your cost down the road. It’s important to understand what factors affect auto insurance rates so you don’t overlook opportunities to save or accidentally make a choice that provides only temporary savings.”
The survey found other gaps in consumers understanding of what factors determine their insurance premiums. For example, more than one-third of consumers did not realize their credit-based insurance score can be used to determine auto insurance premiums.
The telephone survey of 1,010 adults, 18 years or older, was conducted from April 14 to 17 by Opinion Research Corporation and was designed to gather information about what changes consumers were making during an economic recession to save money on their cars. The details of that survey were released Tuesday.
