People who don’t drive much are generally at lower risk for traffic accidents, but they may not always get big discounts from auto insurers, a new analysis finds.
In many markets, drivers may not be offered significant reductions in their auto premiums, even if they cut down on mileage, the report from the Consumer Federation of America found.
The federation, which has long been critical of auto insurers’ rate-setting criteria, tested premiums in 12 cities by obtaining 275 quotes from the websites of five large insurance companies. The biggest insurers typically offered “little or no” premium reduction to low-mileage drivers compared with high-mileage drivers, the research found — even though the distance driven annually is an important factor in predicting accidents.
“You can’t crash when you’re not driving,” J. Robert Hunter, the federation’s director of insurance, said in a call with reporters.
Yet some companies ignore drivers’ actual mileage driven, he said, or give a “pittance” as a discount that has little impact on premiums. Insurance companies often emphasize a driver’s personal characteristics, such as marital status and credit score, rather than other risk indicators, like the annual mileage driven, said Mr. Hunter, a former state insurance regulator. “How well you drive and how much you drive” should be the main factors considered in setting premiums, he said.
In most areas, he said, drivers pay the same premium whether they drive 90 miles round-trip to work each day, or if they take public transit and drive their car only on the weekends.
To conduct its analysis, researchers obtained quotes for basic liability coverage from Allstate, Farmers, Geico, Progressive and State Farm, using the same hypothetical driver with a clean driving record, but varying the number of miles driven annually. Researchers sought five different quotes for miles driven each year, from 2,500 miles to 22,500 miles. (The cities tested were Atlanta; Baltimore; Boston; Charlotte, N.C.; Chicago; Cleveland; Houston; Los Angeles; Minneapolis; Oklahoma City; Rochester; and Tampa, Fla.)
The report found that outside California, given drivers with similar characteristics, Progressive and Farmers usually quote the same rates to someone who drives just 2,500 miles a year that they do someone who drives 22,500 a year. (Progressive referred an inquiry to the Property Casualty Insurers Association, an industry group. Farmers didn’t immediately respond to a request for comment.)
Geico offered a small price reduction, the analysis found, while Allstate’s and State Farm’s quotes for the lowest-mileage drivers averaged savings of 11 percent and 13 percent, respectively, compared with the highest-mileage drivers.
Drivers in Los Angeles saw consistent savings for fewer miles driven, the analysis found. Premiums dropped nearly 9 percent on average for every reduction of 5,000 miles driven per year, and very low-mileage drivers were quoted rates of about 30 percent less than very high-mileage drivers. California law requires auto insurers to give mileage driven the second-greatest weight when setting premiums, after the consumer’s driving record, researchers said.
Quotes for drivers in other cities saw average savings of less than 2 percent for every 5,000-mile reduction in annual mileage, or less than $3 in savings per month.
The Property Casualty Insurers Association said in a statement that the federation’s latest report was “flawed” and showed a “fundamental misunderstanding of auto insurance underwriting and rating.”
Insurers use multiple factors that have proved to be effective in predicting the likelihood of someone filing an insurance claim, the association said. “By using a variety of rating factors, insurers are able to develop a more complete picture of a driver’s potential for filing a claim and in this way more accurately price the policy.”
As the report itself says, insurers do consider mileage driven as a factor, the association said, but “as one would expect in a competitive market, it is done so differently among insurers.”
Some insurers, the report noted, have said they don’t emphasize mileage in setting rates because customers often wrongly estimate how much they drive. The researchers suggested, however, that there are ways to verify the accuracy of mileage estimates, like recording odometer readings at the time of policy purchase or renewal, or after accident claims.
Here are some questions and answers about auto insurance premiums:
Should I tell my insurance company if I’m driving less?
Yes. “It’s always worth talking to your agent and saying, ‘Do you know how much I drive?’” said Doug Heller, a federation researcher who conducted the study with another researcher, Michelle Styczynski. Retirees, in particular, should check in with their agents. They may be charged the same rate as they had previously been, even though they are no longer commuting to work.
How can I lower my insurance premium?
Margot Gilman, money editor at Consumer Reports, said one of the best ways to make sure you’re getting the lowest rate possible is to comparison shop at least every few years. “Cast a wide net,” she said: Get quotes from a dozen insurers, not just two or three. She recommends trying online quote comparison tool the Zebra.com. (But also check an insurer’s reputation. A rock-bottom premium won’t help much if the insurer gives you too low an estimate on repairs. Consumer Reports offers customer satisfaction ratings on many insurers, though you have to be a member.)
A start-up, Metromile, offers pay-by-the-mile insurance, but is currently available in just a half-dozen cities.
What other discounts might be available?
Discounts may be offered to student drivers for maintaining good grades, for drivers who take a “defensive driving” class or to customers who bundle various insurance policies (like auto, homeowners and life) with the same insurer. Ask your agent.