Driving miles and claims go down; rates continue to go up
The Department of Transportation has tracked large declines in miles driven through June of this year, in response to higher gas prices. Last time this happened, during the 73-74 Arab Oil Embargo, the number of motor vehicle collisions dropped dramatically, also. Logic would suggest that in a fair system, insurance rates would be dropping, too, since claims and risk are down. Not so. The Insurance Information Institute reports that nationwide, rates are up almost 2 percent in the first half of the year. New York insurers are seeking a 7 percent increase, and insurers in North Carolina are seeking an accross-the-board increase of 13 percent.
Since auto insurance is mandatory, a drop in [literally] billions of miles driven means either windfall profits for the insurance industry or rate cuts for consumers. It is patently obvious that in its unregulated state, the response is higher profits, not lower prices. A few states have challenged these increases or reserve the right to approve them in advance. In California, auto rates are currently falling, thanks to state regulation. In New York, the insurance department challenged GEICO's proposed 20 percent rate hike, seeking underwriting information to justify the increase: GEICO withrdrew the request instead. In North Carolina, where insurers are proposing the 13 percent hike, the Insurance Commissioner, Jim Long, has taken the position that a 20 percent rate cut would be justified.
In states like Michigan where the auto insurance industry has taken control of the judiciary, there is no chance that rates will be reduced proportionally. You can read in prior blogs of the reported "excessive" profits recorded by insurers in our state, thanks to restrictions on when an at-fault can be sued and reduced claims, combined with progressive rate increases.