Auto insurance rates fall for many across region

By Wayne Tompkins

wtompkins@courier-journal.com

The Courier-Journal





Many Kentucky and Indiana residents are finding their auto insurance premiums have dropped because insurance companies are getting fewer claims.



"I love it," said Lennel McDaniel, 46, a State Farm customer from western Louisville who said his yearly premium recently dropped to about $950 from $1,000. "It's a new thing -- you very seldom see the price of anything going down."



Not every driver is getting lower rates, but customers with good to excellent driving records are likely to see some savings, insurers say.



The trend is nationwide.



Several insurers have announced rate decreases this year -- particularly for their best customers. However, when bad drivers as well as good drivers are factored in, rates are rising -- but at their slowest pace in five years.



"When you get right down to it, we're seeing fewer accidents," said Robert Hartwig, chief economist for the Insurance Information Institute in Washington, D.C.



According to insurance companies, agents and industry analysts, rates also are cooling off because of:



Increased competition among insurers for safe drivers.



Advanced and widespread anti-theft technology.



More sophisticated rate calculations, which allow companies to better pinpoint the best and worst drivers.



A decrease in drunken driving.



Better teaching and tougher licensing of teenage drivers.



Baby boomers aging into their statistically safest driving years.



In Kentucky, the state's two largest auto insurers -- which have a combined 31 percent of the market -- recently announced rate decreases.



State Farm cut rates 3.5 percent, which will reduce premiums by $12 million this year. The first phase, a 1.8 percent drop, occurred this spring and will be followed by a 1.7 percent decrease Oct. 15. Individual drivers' rates will be higher or lower depending on their driving record.



Kentucky Farm Bureau Insurance recently unveiled $40 million in rate reductions for its best customers. In March, the company increased safe driving discounts for customers who have not had a claim or violation such as a speeding ticket in at least three years.



This month, the company launched rate reductions in collision and underinsured-motorist coverage and lowered premiums for drivers in age categories with favorable driving records.



Typically, drivers age 50 to 64 who are not insuring drivers under age 25 get the lowest rates. Teenage boys ages 16 and 17 generally pay the most.



In September, Kentucky Farm Bureau will initiate new discounts for vehicles with good safety ratings, the company said.



Customers are being informed of the lower rates as they get their bills, the companies said.



Pete Hammer, owner of a St. Matthews hardware store, has three cars insured in his name -- and a 16-year-old daughter who will begin driving soon.



Hammer, one of Kentucky Farm Bureau's 700,000 auto-insurance customers, noted that the premium for his three vehicles has dropped from $1,977 a year to $1,610, a savings of $367. He said at first he thought the lower rates on his bill were a mistake. He learned that his driving record made the difference.



When his daughter Kathleen gets her driver's license, Hammer said, his rates will go up -- but the rate reduction is a welcome way to help offset that cost.



Keith Lamkin, a Louisville resident who works for a tool-grinding company, insures both a teen driver and an antique car.



Also a Farm Bureau customer, Lamkin said his rates are down 5 percent to 8 percent, even with his 17-year-old son driving. He said he pays about $500 quarterly to insure a 2004 TrailBlazer XLT, a 1992 Chevy Blazer and a 1965 Chevrolet Super Sport.



"From the statement in the letter that I got from them, it's just because of my record as far as no citations and the driving record I have," Lamkin said.



In a filing with the Kentucky Department of Insurance, the Farm Bureau said its losses for collision damage fell to $61 million last year from $66 million in 2003. Property damage claims from collisions also were down last year, as were comprehensive claims -- the category that includes theft. Total losses from claims fell to $282 million last year from $292 million in 2003, the company said.



The Insurance Information Institute estimates the average auto-insurance premium nationwide rose almost 8 percent in 2003 and 3 percent in 2004. It projects a 1.5 percent increase this year, the smallest nationwide increase in five years.



"We have safer cars, but we have improvements in road safety as well -- anything from rumble strips to better lighting and signage," Hartwig said.



Many people also are taking higher deductibles, he said, meaning they are paying out of pocket for minor incidents.



The National Association of Insurance Commissioners said Indiana drivers paid an average of $742 in 2002, the latest year available, to insure a car. In Kentucky, it's $816. Both states are below the nationwide average of $880.



The association said rising costs for medical care and higher jury awards continue adding to insurance costs.



State Farm said this month that it would lower rates for Hoosiers by 5.7 percent, which follows two 2004 decreases totaling nearly 11 percent, according to a press release.



State Farm Indiana spokesman Joe Johnson said the company's rates are down nearly 18 percent from eight years ago. The most recent rate cut is expected to save Indiana customers $34 million a year, he said.



Another large Indiana insurer, The Progressive Group, has dropped its rates in Indiana 10 percent in the last two years, spokeswoman Leslie Kolleda said.



State Farm says its Kentucky claims are down 16 percent over the last two years. "Mostly what we are seeing is a decrease in claims -- that's basically it," said Brian Maze, a spokesman for State Farm's Kentucky operations. "Drivers are driving more responsibly, No. 1. There are safer vehicles out there as well."