Study notes affordability rising in all income groups
The latest report from the Insurance Research Council finds that personal auto insurance is becoming more affordable for all income groups. The study entitled, Trends in Auto Insurance Affordability, employed auto insurance expenditure-to-income ratio in order to analyze the rates of affordability in this line of insurance.
“There is a lot of interest in the affordability of auto insurance on the part of consumers, policymakers and regulators. This report adds to the discussion, showing that auto insurance is becoming more and more affordable,” said Elizabeth Sprinkel, senior vice president of the IRC.
While the reports findings do not prescribe specific thresholds at which auto insurance becomes affordable, it rather examines the trends in affordability in order to provide a more objective analysis of the issue.
Currently, auto insurance uses approximately 1.5 percent to 1.6 percent of the average U.S. consumer. This figure is much lower than figures from previous decades noted the IRC.
In order to see affordability trends, the Council employed auto insurance expenditure-to-income ratios calculated by using insurance expenditure data from the National Association of Insurance Commissioners as well as from the Bureau of Labor Statistics Consumer Expenditure Survey. Using both measures, the IRC found that affordability in auto insurance has increased dramatically over the long-term for both average and low-to-moderate income consumers.
Here are some other key findings from the trend report:
- The study includes state estimates indicating that auto insurance affordability has also been improving in most states.
- All but five states experienced improved affordability from the 1990s to the 2000s, and all but four states have shown an improvement in affordability between the 2000s and the present.
- Affordability does vary across states, however. According to the report, auto insurance was least affordable in Louisiana (2.85 percent of income), Florida (2.45 percent), New York (2.42 percent), Delaware (2.18 percent) and Michigan (2.10 percent). The most affordable states were found to be North Dakota (1.03 percent of income), Iowa (1.05 percent), New Hampshire (1.06 percent), Virginia (1.07 percent) and Wyoming (1.08 percent).
- The report also compares affordability rates between auto insurance and other industries who products are considered necessities finding that auto insurance represents a small percentage of the average consumer’s budget.
How to order the report
The report, published on August 25, 2015, can be order directly from the Insurance Research Council website. The cost is $1,000 for either the .pdf or print version
The Insurance Research Council is a division of the American Institute for Chartered Property Casualty Underwriters, more popularly known as the Institutes.