|
|||||
|
An Overview of Auto Insurance In RI 2002-2005
It has been presented to RI legislators that Auto Body repair costs are driving up Insurance premiums. To test the truthfulness of this statement we have to take a look into the Insurance Industry in RI. In the Report from the National Association of Insurance Commissioners covering 2002-2005 the report does in fact show that for 2004 (the last year information is reported for ) RI does show a average for vehicle repair approximately $580. five hundred eighty dollars over the national average. ( Page 218) But now lets look further, the same report also shows in 2003 RI was almost $200. Less than the national average in that year, further we had gone down $161 from the year before that 2002. In short the report shows a fluctuation from all years to all states for average repair costs. No one state is the most expensive consecutively. The differences can be explained by a multitude of different factors, the type of vehicles being fixed that year, Luxury cars cost more to fix, foreign cars can cost more, the age and construction of the vehicle are factors the cost a newer car with more Airbags cost more to fix than a seven year old model of the same car, SUV and Pickups that hit passenger cars do more damage than two passenger cars hitting each other. Further, SUV and pickups cost more to fix as listed in a report from Insurance Information Institute. Frontal impacts at intersections cost more to fix than cars backing in to each other in parking lots, there is a wide variety of factors that go into this average repair cost figure and it is not broken down to know all those factors for any year.
Next we need to look at the impact of direct repair shops on Average vehicle repair costs. Direct repair shops fix vehicles for insurance companies with no licensed appraiser looking at the vehicle before repairs begin. In a report from Body Shop Business from 2002 it shows the national average for repair costs in direct repair shops to be 1,758 but the average repair cost at non direct repair shops is only 1,552. A $206. Dollar difference, the major reason being that the Direct repair shop writes its own ticket despite agreeing to lower labor rates and other discounts, when one hour of repair time written in an independent body shop becomes two hours in a direct repair shop it is easy to make back those discounts and actually charge more for the repairs. The same report done in 2007 shows the average repair in a Direct repair shop being $2,144. and $1,680. In a non direct repair shop, the difference has now grown to $464. With the high concentration of Direct repair shops in RI it would only make sense that we have a higher average repair cost and further is showing the need to have a law to make all claims over 1,500. Be appraised by Licensed Appraisers.
Now that we have looked at the NAIC report used by insurers claiming RI Auto body shops are causing premium to go up and that they might have to leave the state if more laws are passed we need to look beyond the one section on Auto repair costs and look at all the other sections as they paint a very different picture of the RI auto Insurance market than insurers would have you believe. The first report you might look at is the average cost of Premiums in RI( Page 26) it shows a steady increase every year from 2001 to 2005 placing us a one of top ten most expensive states to purchase insurance in, this combined with the previous claim of vehicles costing more to fix in RI than any other state would seem to make sense but remember in 2003 we were lower than the national average yet RI premium was $172 higher than the national average.
Now lets look at the Auto Insurance market for Liability coverage in RI ( Page 164) it shows income for the years 2002 threw 2004. When we subtract the losses incurred for the same section of Liability coverage from report (Page 165) we see the Insurance industry profited 44 million in 2002, 78 million in 2003 and 104 million in 2004 Representing a profit in this one section of Auto insurance of 11% 19% and 23% respectively.
The next section (Page 47) Automotive Bodily injury Liability shows income combine that with the report (Page 48) showing losses incurred in the same section of insurance represent a profit over the three year period of 10.3 million in 2002, 28.3 million in 2003 and 36.3 million in 2004 in RI. Representing profit percentages of 7%, 12.5% and 20% respectively.
A section of Automotive Property Damage (Page 62) shows income for the same years 2002- 2004 and the Property Damage report (Page 63) Shows losses for the same section. The profit for this section of RI auto Insurance is 2.7 million in 2002, 13.5 million in 2003 and 21.1 million in 2004. Representing profit margins of 3%, 14.5% and 21% respectively.
A section on Uninsured/ Underinsured Motorist in RI (Page 147) shows income for 2002-2004 and the report (Page 149) shows the losses for the same section of Auto Insurance. The profit for this section is 19.6 million in 2002, 22.3 million in 2003 and 24.1 million in 2004. Representing profit margins of 29%, 33% and 34% respectively.
A report on Collision Insurance frequency and severity 2002-2004 (Page 181) shows RI below the national average on severity in all three years. With the gap between the two starting out at $23 dollars and ending at $63. So collision loss severity is decreasing in RI and puts us below the national.
The report on Comprehensive frequency and severity (Page 197) shows RI is not only lower on claim severity but also frequency in all years from 2002-2004. RI is $100 dollars less in severity and half the frequency of the national average. This is puzzling because comprehensive is traditionally applied to cover vehicle repair when damage is incurred from falling objects, fire and theft but remember RI is supposedly the most expensive state to fix a car in.
These reports show the RI auto Insurance market is very profitable, if you look at the profit margins Insurers have you will see they are fleecing RI motorists and yet claim RI auto body shops are driving up the costs to RI consumers. This insurance industry report shows Insurance companies profits and a lack of regulation is the reason RI auto Insurance is so expensive. It is unlikely Insurers will leave when the profits in RI are so high, secondly the claim of them having to raise rates has already happened, Rhode Islanders have been paying far more than they needed to for years now.
Next lets look at the labor rates insurers paid in RI for automobile repair. In 2001 almost all insurance companies were paying RI Auto body shops $38. Per hour to fix vehicles and in 2005 the hourly rate was $38. Per hour. That is right not one cent increase in the five years between 2001 and 2005 despite increases in every aspect of running a Auto body shop and better yet an increase of 19.07% in Auto insurance premiums. When insurers claim they will have to raise rates to pay Auto body shops more per hour realize the fact that they already have raised rates and kept the money.
RI is not alone, nationally insurance companies have continued to claim high losses of 98 cents on the dollar after tax and continue to push for higher premium annually but rarely do State regulators look closely at the formulations to know how these figures were arrived at. From 2001 to 2005 Nationally auto insurance has risen 19.07 % when the CPI has only gone up 11.51% in that same time frame. The profit reports for the Insurance industry for 2006 and 2007 should be even higher according to a report by the Consumer Federation of America. A 2008 report from Americans for Insurance Reform blast state regulators for failing to do their job and protect consumers from overpriced insurance. Who is protecting the consumers in RI when insurers are allowed to raise profit levels this high?
All laws passed between 2001 and 2005 on behalf of A.B.A.R.I. had to do with notification to RI motorists about their right to choose a repair shop to counter the steering tactics insurers were using to push people to the Direct repair Auto body shops and one law on aftermarket parts standards, a Law that pushes the expense of poor aftermarket parts back on the distributor selling the problem part. These same laws are being adopted threw out the country by other states that see the success of the RI model. I hope this letter combined with the complete report from N.A.I.C. helps to set the record straight.
|
|||||
