Car insurance trends throughout the nation undergo various changes throughout each year. These changes can either be positive or negative for the average driver. In order to get an understanding of where car insurance rate trends are heading in 2014, it is important to take a look at 2013 and what has transpired.
Some Key Information to Understand
Studies undertaken by the National Association of Independent Insurers discovered that a large percentage of household income is spent on car insurance. Many low-income households were seen to be spending about thirty percent of their yearly income on keeping their vehicles insured. This often resulted in people not being able to afford food and shelter. In many cases, people had to sell their vehicles, because they simply couldn’t afford to keep them running. This research points to the fact that the recession played such a major role in the amount of money that these people were able to afford to spend, that something needed to be done with the current car insurance rates.
Costs in 2013 and Indication for 2014
The government set out in 2013 to create a guideline for insurance coverage. The liability coverage was set at a minimum of $10,000 for body injuries, and this was a continuation of previous years’ amounts. The study that the government conducted showed that ninety percent of injury claims amounted to less than $10,000, and this could be an indication that the minimum liability amount may be lowered in 2014. However, the government hasn’t given an indication that this will definitely be the case. Currently the average cost for a driver to be insured is three dollars per day, but with the government guidelines (based on their sponsored insurance policy), that amount was cut by more than a half. The new guidelines set a car insurance price target of one dollar per day.
The Most Important Benefactors of the Government’s Guidelines
Many people who don’t make a lot of money need their cars in order to get to and from work. Often, it isn’t an option for them to have a car, and so paying what the government has deemed to be a high rate for the average insurer is a lot to ask. With the new guidelines – as well as a government indication as noted above about a possible further reduction in 2014 – low-income insurers have lower rate options when it comes to insuring their vehicles. The issue that the government has identified is the price that low-income earners were paying, citing inequality as a motivating factor in the changes. The government states that all other factors (such as driving history) considered equal, it is unjust to force a low-income individual to pay the same amount as a high-income individual. To the low-income person it would represent a disproportionately large portion of their earnings going toward insurance.
Unfortunately, however, the government has also stated that the administration costs associated with evaluating each driver’s financial history are too great. While it would result in fairer costs to people who don’t have a lot of money, the amount of administration involved in implementing a more equitable system would be significant. In essence, the cost to evaluate each driver’s ability to pay would be so high that insurance rates would have to increase in order to fund such an endeavor. This indicates that the government is not at the point where it will introduce a rate schedule that is based on the individual’s financial history in 2014. Furthermore, it doesn’t appear that the government will introduce this type of plan any time in the future, unless there is a quicker and easier way to evaluate the insurance carriers’ financial situations. It is important to remember, the government notes, that this type of arrangement would result in a costly appeals process, and other costs that may not be obvious at first glance.
Some States do Have a Low Income Option
In 2013, several states did implement a low-income rate for car insurance. However, there is little indication that this type of price plan will be available in these states in 2014. This is because many of the criteria that are necessary, as noted before, are creating major backlogs in assessing whether a person would qualify for a lower rate. For instance, according to the California Department of Insurance, the Low Cost Automobile Program (CLCA) requirements are often very detailed. This leaves many people ineligible for low rate car insurance. This is causing many of those who can’t afford car insurance to either drive without insurance, or be underinsured. There is no indication that any of the states that are offering the low-cost option will provide a less strict application process for applying for the low rate. However, with an increased concern over the financial challenges that people are facing, there could be a greater push in 2014 for the government to provide sufficient funding so that the applications for low-rate insurance can be dealt with. Having more staff available to deal with the requests for the low-rate insurance will allow for more lenient eligibility criteria.
The overall trend indicates that car insurance is out of reach for many people looking to put their vehicles on the road. Thus, the government is investigating rates from previous years to determine whether there is a discrepancy in the costs for motor vehicle accidents, and the amount of money people are paying for coverage. This could indicate that 2014 will have greater leniency in who can apply for low-rate insurance in the states that offer a low-rate auto insurance quote.
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