Auto Insurance Rates on the Rise: Increased Medical Costs, High Vehicle Repair Costs,
Jury Awards, Fraud Among Reasons -- Auto Owners Can Find Ways to Save Money,
INDUSTRY FINANCIALS AND OUTLOOK
Rising costs of medical care, vehicle repair, jury awards, automobile theft and fraud are expected to drive
up auto insurance rates by six percent in 2004, according to an analysis by the Insurance Information
The projected increase represents a slight moderation from 2003 when auto insurance costs are estimated
to rise 8.5 percent, the I.I.I. observed. The average cost for auto insurance nationwide for 2004 is
estimated to be $898 – an increase of $51 per vehicle from this year.
“Rising claims costs continue to fuel increases in auto insurance nationally,” said Robert Hartwig, senior
vice president and chief economist of the I.I.I. “It costs more to repair cars, particularly following accidents
involving sports utility vehicles. This year insurers will pay between $15 and $20 billion in medical claims.
Higher costs for hospitalization and pharmaceuticals, and state regulations that permit abuse of medical
treatments and associated legal costs are also to blame,” he said.
Cost Drivers in Insurance
Medical costs have played an important factor in the auto market. Each year there are more than two
million car accidents involving injuries. Typical costs for treating an auto accident victim range from $6,000
to $9,000, but can easily run into the tens of thousands of dollars. The cost of auto injury claims is rising by
as much as 20 percent in some states.
Higher repair costs are another significant cost driver today – rising two to three times the overall rate of
inflation in a number of states. The suspension of the use of generic parts in the repair of damaged
vehicles is a factor that could ultimately add $4 to $5 billion annually to the cost of auto insurance. Name
brand parts often cost 30 percent to 70 percent more than their generic equivalent, even t