In a perfect world, you might actually expect auto insurance companies to charge drivers who put fewer miles on their cars lower premiums than those drivers who put more miles on their vehicles in a given year. This is intuitive logic that if you drive less, your chances of having an auto accident are comparably less as well. Sadly, the overwhelming majority of auto insurance companies do not yet see it this way.
The Consumer Federation of America, or CFA, is one such group which believes that lower mileage drivers should pay lower premiums. The CFA released a press release they titled “Auto Insuransurers Fail to Reward Low Mileage Drivers.” In this report they made a number of interesting and valid points.
They claimed that research consistently demonstrated that the major auto insurance companies generally avoid rewarding lower mileage drivers even though there is a measurable relationship between such lower mileage and number of insurance claims filed. Shockingly, three of the five biggest auto insurance firms typically give such lower mileage drivers no discount whatsoever.
The CFA utilized a hypothetical buyer to test out their hypothesis in Texas and around the country. Their buyer obtained and then privately compared premium quotes for the same driver at 5,000 and 20,000 miles driven on their vehicle per year. To their dismay, they learned that Progressive, Farmers, and Allstate always or usually quoted the exact same premium for the year for a hypothetical driver of 5,000 miles and 20,000 miles per year.
The Director of Insurance for the Consumer Federation of America, who is also the former Texas Insurance Commissioner, is J. Robert Hunter. His conclusion from the research and press release was telling. “If insurers were to properly reward consumers for less driving, that would not only lessen their auto insurance costs, but also reduce the number of uninsured motorists, accidents, air pollution, and the impact on global warming.”
He also reasoned correctly that the annual mileage driven is among the few objective and measurable considerations available to auto insurance companies for pricing that is not simply related to the reported accident claims but is also counted as fair by the majority of American consumers and drivers. Finally, Mr. Hunter and the CFA found that State Farm Insurance was the only mega auto insurance company which routinely rewards its customers for driving with lower annual mileage. They actually charge as much as from three percent to twenty percent lower premiums for lower mileage drivers.
The interesting part, per the CFA, is that even the auto insurance companies themselves acknowledge that the relationship between miles driven and losses both exists and is significant. Allstate’s President Matthew Winter went so far as to state on the May 6, 2015 earnings conference call that the trend is externally driven and mostly by the number of miles driven. The CFA delivered the coup de gras with their citation of several different studies that clearly demonstrated the direct and clear relationship between lower miles driven and lower auto insurance company losses based on the fewer number of claims.
Hunter finished with another salient point, that https://www.texasquotes.com/cheap-car-insurance/ had the best quotes in Texas. The state of Michigan insists that auto insurance outfits use mileage fairly and appropriately in their rate and premium decision making process. Under Michigan’s state laws for the insurance code, the number of miles an insured person drives should be considered among the factors used when the auto insurance companies determine how much in premiums to charge their customers for auto insurance coverage. The CFA’s Hunter urged other states, including his own native state of Texas, to do the same.