Affordable Automobile Insurance

Auto insurance rates for Ontario drivers are likely to soar skywards in the coming months, though the government says it is going to address the issue of hike in auto insurance premiums. Recently the Financial Services Commission of the state approved rate change proposal for many insurance companies. The commission’s report states that the average increase in insurance rates over first three quarters of 2009 were 6.2%.

According to a newspaper report, premiums may actually go up by average 9.1%, whereas Toronto alone will experience premium increase of about 14%. Insurance companies say the rates are rising because of rising rehabilitation and physiotherapy costs for accident victims.

A number of recommendations have been made to control the rising insurance costs. One such proposal states that minor injuries cover should be kept limited at $25,000. Government is making attempts to consider other proposals which will help strike an adequate balance between insurance affordability for drivers and protection.

There is still some time to go before the state budget is presented, and till that time people will have to struggle with fast increasing automobile insurance rates. About ten automobile insurance companies have already been allowed by the regulatory agency to increase their insurance rates in the last year. These companies cover about one fourth of Ontario automobile insurance market.

If one looks at some extreme examples, insurance premiums may increase by as much as 30% in some cases, depending on driving record, insurance company involved and community. In Greater Toronto alone, the average car insurance premium was $1682 in 2007, whereas now it has increased to $1917 in 2009. The Insurance Bureau of Canada says insurance premiums are calculated by factoring cost of claims and investment income generated after the premium is received. Other things that are factored include taxes, selling costs, overheads, account settlement costs and reserved funds.

A recent study conducted in Texas, insurance companies have reduced their insurance rates due to increasing competition. Insurance companies’ representatives say this is a favorable time for Texas drivers. Almost in all automobile insurance companies, insurance rates are either stable or expected to reduce further. The change has come due to extremely competitive insurance environment in Texas. The Texas insurance market is believed to be most consumers friendly as the insurance rates here have gone down by about 14% since January. For six month insurance, drivers have to pay $744 on an average.

Texas ranks 18th in insurance affordability, as the drivers here have to pay only 3.6% of gross annual income as insurance premium. The least costly of all states is Massachusetts where drivers have to pay the least, about 2% of their gross income. Louisiana is the most expensive where drivers have to pay about 6.6% of their gross salary on automobile insurance premiums.

The benefits have begun to reach the end consumers who have noticed significant decrease in their automobile insurance rates. Texas drivers believe it is a favorable place for drivers, keeping the macro economic conditions of country in the mind. Many companies, however, which had invested more in the stock market, are increasing their insurance rates. Companies which dependent on stock markets to make profits have struggled and have been forced to increase their insurance rates.

The same study also found that male drivers had to spend more on automobile insurance, compared to women. Insurance companies believe, males are costlier to insure because in the event of an accident, they file the biggest possible claim. Insurance companies suffer huge losses due to these trends. Young male drivers face a higher risk of being killed or injured in an accident compared to other age group drivers and female drivers.