Insurance Quotes & Advice

Last year at around this time the price of oil was at around $60 a barrel.  While the price of gas hasn’t climbed to the same relative levels as oil, drivers are definitely starting to feel the pinch in their wallets.

The fact is though, many Americans are driving less these days and auto insurers should see a benefit from fewer accidents and thus fewer claims.  Auto insurers are no different from the rest of the insurance industry and are seeing a large drop off in investment profits  from the general decline in financial markets.

In the short term they should see a jump in underwriting income until premiums readjust themselves through competitive market forces.  Something that drivers may look forward to in the next few years is a possible industry move to a usage based premium pricing model.

The current pricing model relies on a number of variables, including gender, age, credit history, and marital status—all of which are predictive but not definitive. Usage-based insurance, on the other hand, uses driving data with which insurers can determine more accurate rates and encourage insureds to control these rates. For example, if a customer drives less, travels at reasonable speeds, brakes and accelerates gradually, and generally practices safe driving behavior, those habits can help lower his rates.

Most drivers would probably welcome this change as it would be more palatable than let’s say the use of credit scores in determining premium rates.  The big question is whether insurers will be able to obtain the needed driving data on a consistent basis.

It is doubtful if this push for this new pricing model would have come about this soon if energy prices stayed at last year’s level.  If driving remains constrained though, one can easily see at least one insurer switching to this model in order to gain market share and then drivers may start benefiting as well.