After reviewing 275 quotes for basic liability coverage from five boastfully insurers, CFA found :
- Consumers save merely $ 30 per year, or 1.6 %, on average for every 5,000 fewer miles drive annually, excluding California drivers, who save $ 81 on average, or 8.7 % .
- Outside of California, premiums for very low-mileage drivers ( 2,500 miles/year ) are merely $ 102 lower*, on average, than identical high-mileage drivers ( 22,500 miles/year ), a savings of about 6 % per annum. ( *Excludes Allstate in Tampa, where minimal coverage quote was not provided. )
- In Los Angeles, very low-mileage drivers save $ 346, or 30 %, compared to very high-mileage drivers .
- Outside of California, Farmers and Progressive provide no mileage-based savings in test cities, Geico offers a little price reduction, while Allstate ’ sulfur and State Farm ’ s lowest-mileage customers saw modal savings of 11 % and 13 %, respectively, compared with the highest-mileage drivers .
“ How well you drive and how a lot you drive should be the primary factors considered when policy companies set premiums, but we have found that many companies either wholly ignore their customers ’ actual mileage or give such a pittance for low-mileage as to have no meaningful impact on rates, ” said J. Robert Hunter, CFA ’ s Director of Insurance and former Texas Insurance Commissioner. “ For people in most parts of the nation, with California as the celebrated exception, you ’ ll much pay about the lapp car indemnity bounty whether you commute 90 miles round off trip every day or if you take public passage to work and alone drive on the weekends. If you drive less, you should pay less, because you can ’ t crash when you ’ re not driving. ”
When policy companies diminish the impact of mileage in their pricing methods, lower-mileage drivers are punished for reducing their risk by having to overpay for coverage, according to CFA .
For its research, CFA sought online bounty quotes for basic liability coverage from Allstate, Farmers, Geico, Progressive, and State Farm for a driver with an unblemished phonograph record in which the only dispute between in each quote was the issue of miles drive ; CFA sought five different quotes in 5,000-mile increments between 2,500 and 22,500 miles per annum per company in each of the 12 cities tested. The cities tested were : Atlanta, Baltimore, Boston, Charlotte, Chicago, Cleveland, Houston, Los Angeles, Minneapolis, Oklahoma City, Rochester ( NY ), and Tampa. The full rig of premium quotes are in the Appendix .
California is the Exception to Unfair Rates, Where Consumer Protection Rules Require Insurers to Charge Lower-Mileage Drivers Less
Among the twelve cities tested by CFA, only drivers in Los Angeles, California saw consistent savings for lower mileage drive, with premiums dropping by an modal of 8.7 % for every reduction of 5,000 miles per year and very low-mileage drivers paying 30 % less than very high-mileage drivers. Under California law, car insurers are required to give drivers ’ annual mileage the second most weight when determining their premiums, with drive record being given the most burden .
Drivers in other cities see average savings of only about 1.6 % for every 5,000-mile annual reduction, which amounts to less than $ 3 savings per calendar month :
- Motorists in Charlotte, Minneapolis, Houston, Oklahoma City, Rochester, and Cleveland see a mere 1.5 % or lower savings for mileage reduction ;
- Chicago and Baltimore drivers receive less than 2 % savings ; and
- Drivers in Boston, Atlanta and Tampa earn less than 3 % for scaling back their mileage .
evening huge drops in annual mileage render alone minor premium savings in most parts of the nation. CFA compared motorists who drive 2,500 miles per class with those who drove 22,500 miles per year and found surprisingly restrict benefits to most drivers tested. only about a quarter of drivers outside of California would receive a 10 % cut and in lone one of 50 tests outside of California did a driver receive 20 % savings or more for driving 20,000 miles less than another driver. Savings for the identical low-mileage drivers were over 28 % from four of five companies in California .
*The relatively large agio savings for low-mileage drive in Tampa – $ 556 per year – chiefly reflects the fact that Allstate.com quotes are extremely high for all drivers ( between $ 6,172 and $ 8,046 per year ) and are for higher than minimum limits coverage as the party web site does not provide minimum coverage quotes on-line .
Insurance Companies Acknowledge Impact of Miles on Insurance Risk but Often Don’t Provide Consumers the Benefit
While all five companies provide discounts for lower mileage drive in California, the companies track criminal record in other states is much worse, as shown below :
| Company | 11 Cities (excl. LA) | Los Angeles |
|---|---|---|
| Allstate | 2.9% | 10.6% |
| Farmers | 0% | 7.7% |
| Geico | 1.3% | 12.6% |
| Progressive | 0% | 9.4% |
| State Farm | 3.2% | 2.9% |
The fact that insurers don ’ metric ton give a lot benefit to drivers for reducing risk by reducing the miles they drive contrasts with company web site statements that explain why lower-mileage drivers should see savings. For exemplar :
- State Farm : “ The more miles you drive in a class, the higher the chances of a crash – regardless of how safe a driver you are…Consider joining a car or van pool, riding your bicycle, or taking public department of transportation to work. If you reduce your total annual repel mileage enough, you may lower your premiums. ”
- Allstate : “ Insurers typically look at how much you use your car. person who has a farseeing commute to work may pay more for insurance than person who lone uses their vehicle to run errands on weekends — since more miles behind the wheel mean more exposure to gamble. ”
- Geico : “ How much you drive each class can increase your car indemnity rates because it places you more at risk of being involved in an accident. People who drive fewer miles than average are normally eligible for lower rates on their car indemnity. ”
- Farmers: “ Driving less could save you a package not only on gasoline but besides on your premium. If it ’ s an choice, try moving closer to work or carpooling. infrequent drivers are at a lower risk of being involved in an accident, and may therefore enjoy low-mileage discounts. ”
- Progressive, singularly, acknowledges that it doesn ’ thymine differentiate between low- and high-mileage drivers ( “ In the large majority of states, we won ’ t even ask about your mileage. You ’ ll pay the lapp rate whether you drive 50 or 5,000 miles a week ! ” ). rather, Progressive solicits customers to sign up for its drive monitoring program that, the caller claims, measures drivers ’ hard braking, belated night drive, and miles repel. The caller provides a 0 % to 15 % discount to participants in the program .
“ The policy industry knows that how many miles people drive each year is directly related to their risk of being in an accident, but companies systematically ignore this and charge drivers higher rates flush when they are lower risks, ” said policy technical Douglas Heller, who conducted the analysis with CFA research worker Michelle Styczynski. “ At the same time, many of these companies feel perfectly at rest charging lower-income drivers with perfect records higher rates than comfortable customers based on factors like their caper title, education charge, credit grudge, and whether they rent or own their home. ”
CFA Calls on State Lawmakers and Insurance Commissioners to Demand that Auto Insurance Rates are More Closely Tied to Drivers’ Mileage
Because insurers are not systematically providing fair bounty reductions for the reduce hazard of driving less, policymakers and commissioners should require that companies do therefore. As a matter of state law, drivers in every department of state except New Hampshire are required to purchase coverage from car insurers, so there is a special obligation on state governments to ensure fairness in price. Whether it is a commissioner who orders a caller to recraft their evaluation methods to increase the impact of mileage on customer premiums or lawmakers enacting legislation that increases the weight given to mileage, it is clean that state of matter legal action is needed to curb diligence practices, according to CFA .
“ precisely how much premiums should fall when a driver decides to carpool to work alternatively of always driving themselves is a fair actuarial exercise but charging the same come to a 5,000-mile driver and a 20,000-mile driver is undeniably unfair, ” said CFA ’ randomness Hunter. “ Since insurers won ’ metric ton collapse low-risk drivers a better, consumer protection rules should require it. ”
Insurer Complaint that Mileage Estimates are Not Useful Doesn’t Hold Up
Some insurers, including Progressive, argue that companies don ’ triiodothyronine stress mileage when setting rates “ because drivers normally overestimate and underestimate how much they drive. ” But there are several ways by which insurers confirm the accuracy of mileage estimates, including recording odometer readings at the times of policy purchase, policy refilling, and accident claims. These readings can be taken not entirely by company agents but besides by third parties such as car compensate shops and other data suppliers. In fact, CARFAX maintains a database on the odometer readings of tens of millions of vehicles, which is based on information from more than 90,000 sources – dealerships, departments of motive vehicles, police and fire departments, lease car companies, and car haunt shops, that insurers use to collect data on their customers. Those states requiring periodic safety and/or emission inspections represent an specially useful source of odometer readings. All these sources can be used to check and, if necessity, compensate driver mileage estimates .
Research Clearly Establishes Strong Relationship Between Mileage and Insurer Losses
actuarial research systematically shows a hard kinship between mileage and insurance claims :
- A 2009 study by Quality Planning, a party providing data to car insurers, based on about 500,000 insurance policies, found that the lowest annual mileage group ( 0-3,000 miles ) had 44 percentage fewer claims than the average, while the highest annual mileage group ( more than 20,000 miles ) had 28 percentage more claims .
- A 2012 Wharton School Working Paper – “ The Use of Annual Mileage as a Rating Variable ” by Jean Lemaire, Sojung Park, and Kili Wang in – concluded that “ annual mileage is an extremely brawny forecaster of the number of claims at-fault. ”
Read more: The 7 Best Car Insurance Companies (2022)
- In an analysis of closely three million car years based on 2006 data from the Massachusetts Commonwealth Automobile Reinsurer, MIT ’ s Joseph Ferreira and Eric Minikel learned that an increase in annual mileage from 10,000 to 30,000 increase claim frequency by 60 percentage and claim costs by 43 percentage .
- And, in a report match mileage readings collected during emission checks in the Vancouver area with insurance claims records for more than 500,000 vehicle-years, Todd Litman of the Victoria Transport Policy Institute found that increasing mileage from less than 5,000 kilometers/year to 20,000-25,000 km/year doubled crash rates .
Contact: Ricky Eckman, 202-737-0766