Do Car Insurance Companies “Subsidize” Traffic Accidents?

A new study of the car insurance industry, by virtual insurance agent Insurify, found that car insurance companies “subsidize car carnage,” according to an analysis by StreetsBlog. According to Insurify’s data, insurance companies charge lower rates for deadlier cars—like SUVS, minivans, and pickup trucks—than for smaller cars that aren’t responsible for as many deaths. Furthermore, people charged with aggressive driving violations “pay only 20 percent more on average than their safe counterparts,” StreetsBlog notes.

According to Insurify’s study, 87% of the more than 227 million licensed drivers in the United States are insured, and drivers pay a average of $1,463 on car insurance annually. Policy prices “can be greatly influenced” by the driver’s record, according to Insurify: drivers with clean records pay much less than those with moving violations. Minor violations on average result in a 24% increase in policy prices; intermediate violations result in 31% higher rates; and severe violations result in 49% higher rates. Insurify gathered its data by examining more than “over 25 million rates from the car insurance applications” over the last year, from all fifty states and Washington, DC.

A section of report detailing the average annual insurance costs for different types of vehicles included the following data: sedans cost $1,558/year; SUVs cost $1,369/year; pickup trucks cost $1,297/year; cargo vans cost $1,061/year; minivans cost $1,097/year; coupes cost $1,640/year; hatchbacks cost $1,435/year; specialties cost $1,692/year; and convertibles cost $1,563/year. As StreetsBlog notes, the three largest vehicles (SUVs, minivans, and pickups) were roughly “19 percent cheaper to insure, in aggregate, than the three smaller ones.” Given the popularity of SUVS and pickup trucks, which have corresponded with “skyrocketing” pedestrian fatalities in recent years, the analysis concludes that this trend makes the roads more dangerous.

Studies cited by StreetsBlog have found that SUVs “are 50 percent more likely to kill vulnerable road users in the event of the crash,” but car manufacturers and policymakers have rejected efforts to address their threat. The reason they cost less to insure is that they’re less likely to suffer damage in an accident that requires extensive repairs, according to the analysis. An Insurify data scientist told the publication, “It’s a common misconception that smaller, more affordable cars are also less expensive to insure… that cheaper price tag may actually be a component of their downfall. Sedans and other small cars are more likely to be owned by younger, city-dwelling (and therefore riskier) drivers than more costly SUVs, trucks, and minivans which are more likely to be owned by older drivers in suburban and rural areas. Not only are small, affordable cars more likely to get in accidents in the first place, they’re also made of cheaper parts that are more likely to rack up expensive damage in the event of a crash.”

For more information on the report, visit Insurify; for more of StreetsBlog’s analysis, click here.

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