The Impact of Pandemic on Auto Insurance Affordability: A State-by-State Analysis

The Least and Most Affordable States for Auto Insurance

According to a recent report by the Insurance Research Council (IRC), Louisiana, Florida, and Michigan are the least affordable states for personal auto insurance, while Hawaii, New Hampshire, and North Dakota are the most affordable. The affordability rankings are based on insurance expenditures as a share of median household income, using data from the National Association of Insurance Commissioners (NAIC) up to 2019.

Historical Trends and Recent Disruptions

Auto insurance had been becoming more affordable nationwide since the 1990s, with premiums as a percentage of median household income decreasing from 1.9 percent to 1.56 percent by 2019. However, the pandemic and subsequent events like supply-chain disruptions and the war in Ukraine have likely impacted these trends. The National Highway Traffic Safety Administration (NHTSA) reported a 16-year high in U.S. traffic fatalities in 2021, with nearly 43,000 deaths, and a 7 percent increase in the first quarter of 2022 compared to the same period in 2021.

Future Implications and Practical Advice

The IRC report highlights the role of attorney involvement in driving up insurer expenses, particularly in states where auto coverage is least affordable. With the increasing frequency and severity of claims, insurers may need to raise premiums to maintain required levels of surplus. To mitigate the impact of rising insurance costs, consumers should consider shopping around for better rates, maintaining a good driving record, and opting for higher deductibles where appropriate.