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Report: Car Insurance Unaffordable for Millions of Americans

Car insurance is essential. It’s mandated in all states, to varying degrees, but it ensures that when we are involved in a car accident, those damages will be covered, whether that is through no-fault personal injury protection (PIP) benefits or through bodily injury liability coverage from the at-fault driver’s insurer. Other times, it’s derived from uninsured/ underinsured motorist (UM/UIM) coverage, which protects those who are insured in case they are struck by someone who lacks insurance or doesn’t have enough insurance to cover the full extent of the damages. 

Previous reports in Florida show that 1 in 4 drivers in the Sunshine State are driving without any insurance at all. A far greater number are driving on only the minimum amount of coverage mandated by law.

Now, a recent study by the Federal Insurance Office reports that millions of Americans live in regions where car insurance is not affordable. The agency looked at auto insurance premiums for basic liability coverage of motor vehicles in some 9,000 zip codes that have a high number of “under-served” consumers – including those with low to moderate incomes and those who are minorities. What they discovered was that the rates were not affordable in 845 of those zip codes analyzed. That’s approximately 9 percent of those areas, which equates to about 19 million people nationally. 

But of course, no one wants to pay auto insurance, even if they recognize it as a necessity. So what constitutes this vital safety net as being unaffordable? In this case, it is identified as areas where the ratio of the average car insurance premium to household income was higher than 2 percent. In the U.S., the average American spends about 2 percent of its yearly income insuring their vehicles.

Agency representatives did not respond to a call for comment regarding the report, which didn’t indicate any specific policy recommendations. The insurance office, you might recall, was formed back in 2010 by the Dodd-Frank Act. One of the goals of the act was to more carefully study insurance markets, which fall under the regulatory authority of state governments. It’s up to the states to determine how much auto insurance coverage people there are required to purchase.

One consumer advocate noted that affordable auto insurance rates are directly correlated with economic mobility. When you can legally drive a car, you have a much wider pool of jobs from which to choose.

States where more than half the under-served population did not have access to affordable auto insurance included:

  • New York
  • Michigan
  • New Jersey
  • Delaware
  • Rhode Island

Insurance industry groups have derided the report by arguing that insurance for autos is affordable in most areas in the U.S., and that criticism of the rising rates of insurance leaves out the fact that there has been an increase in both the number of car accidents and the severity of those crashes. They also noted there is a complex criteria that takes into account how the rates are set – in particular the driving safety records of other motorists.

In an analysis of Florida zip codes, it was revealed that about 29 percent of the zip codes studied here had an affordability index that exceeded 2 percent. In looking at all Florida zip codes, the rate was about 9 percent, which still equates to millions of motorists here who cannot afford car insurance.

Call Freeman Injury Law — 1-800-561-7777 for a free appointment to discuss your rights. Now serving Orlando, West Palm Beach, Port St. Lucie and Fort Lauderdale.

Additional Resources:

Millions Live Where Car Insurance Is Unaffordable, Study Says, Jan. 25, 2017, By Ann Carrns, The New York Times

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Report: Elderly Truck Drivers May Heighten Crash Risk on Highways, Jan. 23, 2017, Orlando Car Accident Lawyer Blog

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