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Auto Insurance Rates On The Rise: Increased Medical Costs, High Vehicle Repair Costs, Jury Awards, Fraud Among Reasons  

NEW YORK, Aug 22 / -- In a bad news, good news scenario, 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 Institute (I.I.I.).  The good news is that projection is 2 percent less than the anticipated increase of 8.5 percent for 2003.  Still, in two years an almost 15 percent increase in rates can be tough to take along with the rising gas prices. So what’s causing the increase and is there anything you can do to lower your premiums?

"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.” 

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. 

Sharply higher jury awards in vehicular liability cases are putting additional upward pressure on auto insurance rates.  The average jury award in auto liability cases rose from $187,000 in 1994 to $323,000 in 2001 – an increase of 73 percent, according to the most recent available data from Jury Verdict Research.

"Auto liability issues are much more important than people realize," noted Hartwig.  "About 60 percent of auto premiums paid in 2002 were for liability coverage."

 Auto theft is another major factor that affects rates.  According to preliminary data from the Federal Bureau of Investigation's Uniform Crime Report, the number of auto thefts rose by 1.2 percent in 2002, after increases of 5.7 percent in 2001 and 0.7 percent in 2000.

What individual drivers pay for insurance coverage varies by state, by insurance company and by motorist. Factors that influence the cost of coverage might include: the type of car and specific safety features;  amount of miles driven and type of driving; family claim record, including the number or severity of accidents; driving record, including speeding tickets; age, sex and experience of driver, credit score. 

What can you do to reduce your costs?  Suggestions from the I.I.I include:

Raising your deductible.  Higher deductibles on your auto could save you 15-30 percent or more.

Compare insurance costs before buying a car.  Your premium is based in part on the car's sticker price, the cost to repair it, its overall safety record and the likelihood of theft.  Many insurers offer discounts for features that reduce the risk of injuries or theft. Cars that are favorite targets for thieves cost more to insure.

Reduce coverage on older cars.  Consider dropping collision and/or comprehensive coverage on older cars.  It may not be cost-effective to continue to buy this coverage on cars worth less than 10 times the amount you would pay for the coverage.

Consolidate your policies. Buy home and auto policies from the same insurer.  Some companies that sell homeowners, auto and liability coverage will take five to 15 percent off your premium if you buy two or more policies from them.

Maintain good credit.  Increasingly, insurers are using credit-based insurance scores to determine auto coverage premiums.  This is because people with good credit tend to file fewer claims.  All else being equal, a person with a good insurance score will pay much less for insurance than someone with a poor score.

Shop around.  Get at least three price quotes.  You can call companies directly or access information on the Internet.  Your state insurance department may also provide comparisons of prices charged by major insurers.

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