Auto Insurance Inflation Slows

By Anita Szoke



of the Journal Star



PEORIA - State Farm's move to lower its auto insurance rates in Illinois reflects a national slowdown of auto insurance rate increases in 2005.

The Bloomington-based insurer, the largest insurer of autos in Illinois and in the nation, announced Tuesday it is cutting its overall auto rate level in Illinois an average of 5 percent. Current policyholders will see changes when their policies come up for renewal.



The rate reduction represents an annual savings of $82 million to the company's Illinois customers, said State Farm spokesman Joe Johnson, adding the company is able to offer the reduction because of fewer claims and improvements in the company's operating efficiencies.



About one in every three cars insured in Illinois is insured by State Farm, Johnson said. The company doesn't release the number of auto policies it has in Illinois or a percentage of total policies it writes.



Nationwide, the cost of auto insurance is expected to rise by just 1.5 percent in 2005, the smallest increase in five years, according to the Insurance Information Institute.



The average cost for auto insurance nationwide for 2005 is estimated at $870, an increase of $13 per vehicle from last year, reports the I.I.I. The projected increase represents a continued slowdown from 2004, when auto insurance costs rose by just 2.8 percent, said Robert Hartwig, senior vice president and chief economist of the I.I.I.



"The price of auto insurance is increasing by little more than one-half the rate of inflation," Hartwig said. "Many people who, for example, drive safe cars, have excellent safety records and good credit-based insurance scores may see their rates go down."



Hartwig cited the declining number of auto accidents, safer cars, new auto theft technology and fraud-fighting efforts as key factors behind the trend.



Nearly two dozen insurance companies have filed rate changes with the Illinois Department of Insurance in January and February, with a large portion of the insurers filing rate reductions, according to the department's Web site.



Allstate Insurance Co. of Northbrook doesn't intend to file an auto rate decrease, said company spokesman Mike Siemienas. "Our rates are already competitive in Illinois," he said. State Farm has implemented rate decreases in 17 states in 2005 and one increase, which is in North Dakota, where the company increased auto rates an average of 3.2 percent.



The states in which State Farm decreased auto rates to date in 2005 were: Alabama, Colorado, Connecticut, Delaware, Florida, Illinois, Iowa, Louisiana, Mississippi, New Jersey, Ohio, Oregon, Pennsylvania, South Dakota, Tennessee, Utah and Wyoming.



The rate decreases range from an average 1.3 percent in South Dakota and Wyoming to an average 7 percent decrease in Connecticut, Johnson said.



All of those rate changes, including the one rate increase, represent a $383 million savings for the company's customers, Johnson said.



The auto rate cut in Illinois is State Farm's fourth such reduction in the state since September 2003, when the company raised auto rates in Illinois an average of 3.4 percent. Last year, the company had two rate reductions - a 5.5 percent statewide average decrease on March 1, and a 0.9 percent rate reduction Sept. 15.



- along with a 0.2 percent decrease Oct. 15, 2003.