Consumer Car Buying Advice Blog

A recent study by the Insurance Research Council shows that the current economic crisis could trigger a rise in the number of uninsured motorists to an all time high and cause car insurance rates to rise.

Just what we didn’t need to hear

Here at Auto Credit Express Car Loans, we’ve always told our customers that they should budget for car insurance just like they budget for a car payment. It now appears that your car insurance premiums may be higher this year for the same reason many Americans are struggling to pay their bills: the credit crisis.

Uninsured motorist statistics

According to the Insurance Research council, the number of uninsured motorists actually dropped, as a percentage, from 14.9 percent in 2003 to 13.8 percent in 2007. That trend, however, may soon take an abrupt u-turn as the effects of business closures and corporate downsizing trigger a rise in the number of uninsured motorists on America’s highways.

The most recent study from the IRC covers drivers nationwide as well as by state for the period 2005-2007. In order to determine the number of uninsured drivers, the Insurance Research Council compares the ratio of claims made by individuals injured by uninsured drivers to those who were injured by insured drivers. Contained in the study are statistics (by state) on uninsured motorists claim frequency, bodily injury (BI) claim frequency as well as the ratio of uninsured motorists to BI claim frequency.

As you might expect, the number of uninsured motorists varied widely by state. What you might not be prepared for is another correlation made by the report.

Choose where you live wisely

One of the most interesting findings of the study is “a strong correlation between the percent of uninsured motorists and the unemployment rate.” According to the report, every uptick of one percent in the unemployment rate can be associated with an increase of three quarters of a percentage point in the number of uninsured motorists. Based on current employment statistics, this means that the number of uninsured motorists will rise from 13.8 percent in 2007 to 16.1 percent in 2010.

“An increase in the number of uninsured motorists is an unfortunate consequence of the economic downturn and illustrates how virtually everyone is affected by recent economic developments,” said Elizabeth A. Sprinkel, senior vice president of the IRC. “Responsible drivers who purchase insurance end up paying for injuries caused by uninsured drivers.”

Since car insurance rates are set up on a state-by-state basis, it stands to reason that those states with the highest unemployment rates will also see higher than average car insurance rates (everything else being equal) over the next few years.

Study Data

Data for the study was collected from nine insurers that represent approximately 50 percent of the private passenger auto market in the United States.

The Bottom Line

For many consumers, choosing where they live is almost as difficult as choosing their parents – it just isn’t an option. But if you currently live in a state such as North Dakota or Nebraska, you may want to think twice about moving to Florida or Mississippi. The winters in those states may be warmer, but you pocketbook will likely be much lighter – especially when it comes time to pay your car insurance premium.

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