Friday, January 11, 2008


If you haven't comparison shopped for auto insurance lately, do it now. In fact, do it even if you looked around as recently as a year ago. Price wars are raging in many states and among many companies, especially for drivers with clean records. In 1998, the average cost of auto insurance declined for the first time in more than 20 years, according to the Insurance Information Institute in New York City.

What's bringing rates down? Cars have gotten safer. More people are using seat belts and air bags. States have passed tougher drunk-driving laws.The number of ante thefts is down. Medical costs are rising more slowly. Demographically, there's a bulge of middle-age drivers, who have fewer accidents than younger ones. All these changes reduce the number and severity of accident claims. Not surprisingly, insurance-company profits have soared. Now competition is forcing many premiums down.

"Ho hum," you may be saying. "My company already dropped my premium by five percent." Or maybe it refunded part of your money. But so what? A competitor might sell you a similar policy for 15 to 30 percent less, with better customer service. Generally speaking, you get the largest savings when you find a different insurer with lower prices across the board.

In some parts of the country, average prices haven't declined yet-and in those places, it's even more important to comparison shop. Everywhere, some insurer is offering policies for less.

There's something else you have to shop for besides a rate: That's a risk classification. The best rates go to drivers with good records, generally known as preferred risks--but in recent years, it has been tough to make the grade. Insurers were demoting drivers with minor violations To the standard-risk category, where coverage can cost 30 to 60 percent more. Drivers formerly slotted as low-standard risks were tossed into the nonstandard pool. Dropping people down in class meant higher profits for insurers, even when rates stayed the same.

Insurers use elaborate computer programs to calculate risk, factoring in not only a driver's age, driving record, type of ear, and number of past accidents, but also her credit history and whether she has a cell phone in her car. (To paraphrase the old saying, Stay alive, don't phone and drive.)

Many insurers are starting to reclassify people back up, says Robert Wallach, head of The Robert Plan Corporation in Bethpage, NY. Here's how he describes the risk categories today: preferred--no underage drivers in the family, no high-performance vehicles (like sports cars), no accidents, maybe one violation; standard--a young driver in the family, a slightly higher-performance car, maybe a single accident, one other violation; nonstandard--teenage driver, tickets, accidents.

But insurers differ in how they evaluate risk. Always ask how you're classified. A good driver offered a standard-risk policy should look elsewhere. Some other insurer might put you on its preferred list.

Those identified as nonstandard risks, including people in state high-risk pools, should also shop around. In past years, you might have landed in this category after a couple of accidents, or even just a couple of speeding tickets. Now you're more likely to be accepted as a standard risk. Your premium will still be relatively high, but not as high as before.

To find lower rates, call an independent insurance agent and ask her to shop for you; check with companies like State Farm that sell through their own agents; or call insurers that sell by phone and mail (such as Geico Direct at 800-8413000, in all states except Massachusetts and New Jersey; Progressive at 800-AUTO PRO, in all states except Massachusetts, New Jersey, and South Carolina; or Reliance-Direct, 800-619-1600, in a number of states). If you apply for new insurance, hang on to your current policy until you're sure the new company has accepted you (up to 60 days).

Also ask the insurer about any discounts you might qualify for. There might be price breaks for: nonsmokers, graduates of defensive-driving courses, senior citizens, students with good grades, families whose teenage drivers attend school more than 100 miles away (so they can't get at the car!), low-mileage cars, cars with air bags or scat belts that wrap around automatically, cars with four-wheel antilock-braking systems, and cars with built-in antitheft devices.

Some other ways to lower your rate:

  • Tell your insurance company or agent about any changes in your life that affect risk. You should pay less when the young driver in your family graduates and leaves home, or when you retire and stop using your car for commuting.
  • Raise the deductible on your collision insurance from $250 to $500, or from $500 to $1,000. Odds are, you'll save more in premiums than you'll ever pay out of pocket for collision costs.
  • Buy a car that's cheap to repair. Your insurance agent can tell you which cars are money-eaters and which aren't.
  • Insure all your cars with the same company, and buy your homeowner's or tenant's insurance there too.
  • Share your car with your teenager. When teens have their own cars, or drive yours more than half the time, they're considered principal drivers and cost more to insure.


By Jane Bryant Quinn and Kate O''Brien Ahlers