Mar 09
23
Auto Insurance during Credit Crunch
Reports suggest that owing to the economic slowdown worldwide sale of vehicles have nosedived. Consequently, the auto insurance industry has taken a backseat too. There are several other factors that have impacted the auto insurers. Some of the prominent factors include restrictions imposed on CO2 emissions, fuel efficiency standards. High energy prices and the fact that the public transportation system has less number of investors have contributed to a slump in the auto insurance industry.
Facts about auto insurance
Expenses related to auto insurance (nationwide) escalated by approximately 2.5% in FY 2008 (TABLE 1). The figure recorded was the highest since FY 2002 and FY 2003.
|
Year |
Expenses (in USD$) |
|
2001 |
USD$ 726 |
|
2002 |
USD$ 781 |
|
2003 |
USD$ 824 |
|
2004 |
USD$ 840 |
|
2005 |
USD$ 829 |
|
2006 |
USD$ 834 |
|
2007 |
USD$ 837 |
|
2008 |
USD$ 859 |
(Source: NAIC, Insurance Information Institute Estimates 2006-2008)
Previously, modest severity level had restricted auto insurance prices from escalating. However, the prices have started rising again (TABLE 2). The table below indicates the same.
TABLE 2
|
Year |
% change during same period a year back |
|
January 2008 |
0.9% |
|
February 2008 |
1.1% |
|
March 2008 |
1.3% |
|
April 2008 |
1.7% |
|
May 2008 |
2.6% |
|
June 2008 |
2.6% |
|
July 2008 |
2.7% |
|
August 2008 |
3.0% |
(Source: US Bureau of Labor Statistics; Insurance Information Institute)
It has also been observed that in some of the states, the insured, in an attempt to cut premium costs have reduced their premium amount to save some money. People have started lowering their auto insurance premium amount despite the fact that in doing so, they don’t have adequate coverage.
More and more vehicle owners are opting for public transport and keeping their cars at home. Few are of the opinion that rising fuel prices are responsible for the change in attitude of the car owners.
There is another fear that is gradually seeping into the automobile sector and that is declining oil supply which is inevitable in the near future. It will change the logistics in the auto industry to a great extent.
Description: The auto insurance industry has suffered a set back due to the credit crunch. Rising prices of fuel have restrained car owners from driving their vehicles and buying cars. All this have affected the auto insurance to a great extent.
