2018/2019 Auto Insurance Database Report

Terms and CalculationsBelow are definitions of terms and calculations used in this report. Formulas will vary depending on theapplication, so readers should note the exact methods used in this report. For example, Average Premium maybe defined as Written Premiums / Written Exposures instead of Earned Premiums / Earned Exposures.TermsPremium: The dollar amount paid for an insurancepolicy.Exposure: A finite unit of risk related to a specificinsurance coverage. In this report, exposures areexpressed as car-years. One car-year is the riskassociated with insuring one car for one year.Loss: The dollar amount associated with a claim.Claim: A formal request for payment related to anevent or situation that is covered under an in-forceinsurance policy.Written Premiums: The total premium amount ofall policies issued during a given time period.Written Exposures: The total number of exposures,in car-years, of all policies issued during a giventime period.Calendar Year: Earned premiums and losstransactions occurring with the calendar yearbeginning Jan. 1, irrespective of the contractualdates of the policies to which the transactionsrelate and regardless of the dates of the accidents.Calendar/Accident Year: The accumulation of lossdata on all accidents with the date of occurrencefalling within a given calendar year. The earnedpremium is the same as in calendar year.Earned Premiums: The portion of the totalpremium amount corresponding to the coverageprovided during a given time period.Earned Exposures: The portion of the total amountof exposure (risk) corresponding to the coverageprovided during a given time period.Incurred Claims: The total number of claimsassociated with insured events/situations occurringduring a given time period.Incurred Losses: The total dollar amount of lossesassociated with insured events/situations occurringduring a given time period. A portion of incurredclaims and losses represents insurers’ estimates ofthe final costs of pending claims that are still openduring the reporting period, as well as estimates oflosses associated with claims that have yet to bereported (termed Incurred But Not Reported, orIBNR).Voluntary Market: Consists of insurance consumersthat insurers select to be provided coverage, usingunderwriting guidelines that are not unfairlydiscriminatory. The voluntary market is also calledthe normal or regular market.Residual Market: Consists of insurance consumersunable to obtain coverage in the voluntary market.Example 1: An auto policy insuring two cars for sixmonths is issued on 9/28/2008, effective10/1/2008. The cost of the policy is 600. Thepolicyholders decide to change insurers in early2009 and cancel the policy effective 1/31/2009.The written exposure for this policy is 2 cars 1/2year 1 car-year and is included in calendar year2008 exposures because the policy was issued in2008. The written premium is 600 (cost of thepolicy), and is included in calendar year 2008premiums. 2022 National Association of Insurance Commissioners2

The policy is in force for three months in 2008 andfor one month in 2009. For calendar year 2008, theearned exposure is 2 cars 1/4 year 1/2 car-year,and the earned premium is: 600 1/2 policy length 300.The calendar year 2009 earned exposure is:2 cars 1/12 year 1/6 car-year,and the earned premium is: 600 1/6 policy length 100.The remaining 200 of the original premiumamount is refunded to the policyholder andcounted as - 200 of written premium in calendaryear 2009.Example 2: A two-vehicle auto accident occurs11/23/2008. No one is hurt, but there is minordamage to one car. The incident is reported as aproperty damage liability claim to the appropriateinsurance company 11/27/2008. The cost of carrepairs is 537 and is paid by the insurer on12/14/2008, minus a 250 deductible. Additionaldamage from the accident is discovered five monthslater, costing an additional 1,281, which theinsurer pays 6/3/2009.There is one claim resulting from this accident,which is included in accident year 2008 incurredclaims. Losses are 537 – 250 1,281 1,568and are included in accident year 2008 incurredlosses. The discovery of additional damage is not aseparate claim because it results from the originalaccident, so there is only one claim. The accidentoccurs in 2008, so all associated losses are includedin accident year 2008 incurred losses, regardless ofwhen the losses are actually discovered, reported,or paid.FormulasLiability Average Premium:Tables 1–5Liability Written PremiumsLiability Written ExposuresAverage Expenditure:(Liability Written Premium Collision Written Premium Comprehensive Written Premium)Liability Written ExposuresCombined Average Premium:Collision Average Premium:Collision Written PremiumsCollision Written ExposuresComprehensive Average Premium:Liability Average Premium Collision Average Premium Comprehensive Average PremiumComprehensive Written PremiumsComprehensive Written ExposuresTables 6–35Pure Premium:Frequency:Incurred LossesEarned ExposuresIncurred Claims 100Earned ExposuresLoss Ratio:Severity:Incurred Losses 100Earned Premiums 2022 National Association of Insurance Commissioners3Incurred LossesIncurred Claims

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Average Premiums and Expenditures 2022 National Association of Insurance Commissioners5

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2015–2019 State Average Expenditures andAverage Premiums for Personal Automobile InsuranceVoluntary and Residual Market Business CombinedThis section provides state average expendituresand state average annual premium per insuredvehicle, for private passenger automobile insurancefor the years 2015–2019. These statistics measurethe relative cost of automobile insurance toconsumers in each state.Results are included for bodily injury and propertydamage liability (including no-fault), collision, andcomprehensive coverages—the basic componentsof a personal auto insurance policy.Average expenditure per insured vehicle is the totalwritten premium for liability, collision, andcomprehensive coverages divided by the liabilitywritten car-years1 (exposures). This assumes that allinsured vehicles carry liability coverage but do notnecessarily carry the physical damage coverages(i.e., collision and/or comprehensive). The averageexpenditure is an estimate of what consumers inthe state spent, on average, for auto insurance. In2019, the countrywide average expenditure was 1,070 an increase of 1.32% over the previous year.The median state average expenditure was 940.The state combined average premium per insuredvehicle, on the other hand, is calculated bysumming the average premiums for the threecoverages. The result is the average cost of anauto insurance policy in the state that contains allthree coverages (i.e., liability,comprehensive,and collision). The countrywidecombinedaverage premium increased 1.18% in 2019, to 1,204 over the prior year. The median statecombined average premium was 1,096.Aggregate written premiums and aggregate writtenexposures are used in calculations with nodistinction as to policyholder classifications, vehiclecharacteristics, or the selection of specific limits ordeductibles, all of which significantly impact thecost of coverage. Nor do the results considerdifferences in state auto and tort laws, rate filinglaws, traffic conditions, or other demographics.CAUTION: Because of these differences, directcomparisons between state results should betreated with a high degree of caution.Tables 1A–1C show the states’ 2015–2019 writtenpremiums, written exposures, and averagepremiums for liability insurance. Tables 2A–2C andTables 3A–3C show the same for collision andcomprehensive insurance, respectively. Stateaverage expenditures are provided in Table 4, andstate combined average premiums are displayed inTable 5.1A written car-year is equal to 365 days of insurancecoverage for a single vehicle and is the standard measureof exposure for automobile insurance. 2022 National Association of Insurance Commissioners7

Factors that Affect State Average Expenditures andAverage PremiumsMany factors affect the state-to-state differences inaverage expenditures and premiums for automobileinsurance. Some important factors include: Underwriting and loss adjustmentexpenseTypes of coverages purchasedRelative amounts of coveragespurchasedUse of telematicsWeatherDriving locationsAccident ratesTraffic densityVehicle theft ratesAuto repair costsPopulation densityMedical and legal costsPer capita disposable incomeRate and form filing lawsLiability insurance requirementsAuto laws (seat belt, speed limits, etc.)loss costs in that state. Many of these cost factorscan influence insurance prices, not only betweenstates, but also between communities andneighborhoods—making price comparison betweenstates and within a state extremely complex.It is reasonable to consider that the “generaleconomic conditions” in a state may affect the priceof auto insurance, but no direct measure of thischaracteristic exists. There are measurable variablesthat can be used as imperfect substitutes for thesegeneral conditions to approximate their influenceon auto insurance price.Three variables—urban population, miles driven pernumber of highway miles, and disposable incomeper capita—are correlated with the state autoinsurance premiums. Graphs on the following pagesshow these variables for each state. The graphsindicate that high-premium states tend to also behighly urban, with higher wage and price levels, andgreater traffic density.Insurance rates are developed based primarily onthe insurer’s cost of paying claims. Certain broadcharacteristics of a state contribute to thefrequency and severity of auto claims and insurer 2022 National Association of Insurance Commissioners8

WYPercentage of State Population Living inMetropolitan Areas - 2010 U.S. 5%92.5%97.7%86.3%91.4%100.0%55.7%72.8%Source: U.S. Bureau of the Census 2022 National Association of Insurance Commissioners987.8%88.6%86.1%87.7%100.0%

WYMillions of Miles Driven per Mile ofRoadway 0.500.35Source: Federal Highway Administration, 2018 Highway Statistics 2022 National Association of Insurance Commissioners10

2018 Disposable Income Per ,42646,28441,97750,82948,01937,48445,956Source: Bureau of Economic Analysis57,87455,92454,841 2022 National Association of Insurance Commissioners1169,494

Annual Rates of Change in Consumer Price Indices, Average Expenditures and Premiums2015 - 201920152016201720182019Cumulative 4Year ChangeConsumer Price Index - All Items*0.64%2.08%2.12%1.94%2.29%8.70%CPI - Auto Insurance*5.75%7.06%7.93%4.64%0.05%20.98%CPI - Total Medical Care*2.55%4.03%1.73%1.97%4.53%12.80%CPI - Auto Maintenance and Repair*1.63%1.84%1.84%2.33%3.42%9.76%CPI - Legal Service Fees*2.86%4.10%1.32%6.36%-0.95%11.12%CPI - New Vehicles*0.24%0.34%-0.58%-0.24%0.06%-0.42%CPI - Used e ed Average Premium**3.11%5.15%6.36%4.91%1.18%18.72%Average Liability Premium**2.09%5.30%6.90%5.40%0.97%19.79%Average Collision Premium**4.88%5.79%6.19%4.00%1.01%18.01%Average Comprehensive Premium**3.06%3.22%4.74%5.13%2.36%16.34%* U.S. Bureau of Labor Statistics** NAICThe Consumer Price Index (CPI) for all itemsmeasures the cost of a fixed set of consumer goodsand services purchased by a set population.Similarly, the CPI for automobile insurance is anindex measuring the cost of automobile insuranceto consumers over time. The annual rate of changein the average premium and average expenditurewill vary from the annual rate of change in theautomobile insurance price index. The averagepremium and average expenditure are affected bychanges in insurance prices, as well as the choicesindividual consumers make as to the types andamounts of insurance purchased, whereas theinsurance price index holds the amount ofinsurance constant to measure price changes in auniform product.Between 2015 and 2019, the national averageexpenditure for automobile insurance increased by19.37%, while the CPI for all goods increased by8.70%. Over the same period, the automobileinsurance component of the CPI increased by20.98%. The basic economic law of demand explainsthe difference between the change in the CPI –Auto Insurance component and that of themeasured average expenditure. As the price ofinsurance (as measured by the CPI) increases, theamount of insurance demanded decreases (i.e.,dropping coverage or increasing deductibles),leading to a smaller increase or even a decrease inthe average expenditure. 2022 National Association of Insurance Commissioners12

The national combined average premium increasedby 18.72%, and average liability premiumsincreased by 19.79% over the 2015–2019 period.Premiums charged for a particular coverage andannual changes in those premiums vary based onthe changes in the cost of factors that impact thecoverage. Bodily injury liability premiums areaffected by medical costs, wage loss costs, litigationcosts, etc. Property damage liability and physicaldamage premiums are affected by the cost ofvehicles, auto repairs, auto parts, labor, motorvehicle theft rate, windstorms, hailstorms, etc.Limitations on Comparability of DataComparisons of average expenditures and averagepremiums between the states can be misleading.The average expenditure and average premium areimperfect measures of the relative “price” ofinsurance across the states because the autoinsurance product is not homogeneous acrossstates. While these data reflect the averageexpenditures within a state, it cannot be assumedthat the data represent equal exposure andcoverage across the states.exposure than others. The average vehicle valuediffers from state to state. It is worth emphasizingthat this report reflects how much consumers, onaverage, are spending for insurance, but it does notprovide information on how much insurance theconsumers are purchasing for their dollars.Demographics: Automobile premiums tend to behigher in urban areas. Therefore, those states witha higher percentage of population in urban areaswill tend to have higher average premiums. Inaddition, the states that gain population rapidlytend to do so in urban areas. Because thepopulation increase is usually not spread evenlyover a state, the increase in average premium fromyear to year can fluctuate significantly.Policyholder preferences: A state’s averageexpenditure and average premium will be relativelyhigher if policyholders in that state tend topurchase higher coverage limits or insure moreexpensive cars. The type and amount of coveragepurchased by an individual is influenced by variousfactors, both economic and non-economic.Policyholders make choices about coverages, limits,and deductibles that depend on their economicsituation, as well as their level of risk aversion, ruralor urban driving areas, local weather and trafficconditions, and other factors.Differences in auto ins

Important answers to common questions about auto, home, health and life insurance — as well as buyer's guides on annuities, long-term care insurance and Medicare supplement plans. Statistical Reports . Valuable and in-demand insurance industry-wide statistical data for various lines of business, including auto, home, health and life insurance.