Auto Insurance Affordability: State-by-State Analysis and Future Trends

Least and Most Affordable States for Auto Insurance

According to the latest study from the Insurance Research Council (IRC), Louisiana, Florida, and Michigan continue to be the least affordable states for auto insurance, while Iowa remains the most affordable. The IRC affordability index, which measures auto insurance expenditures as a share of median household income, ranges from 1.02 percent in Iowa to 3.09 percent in Louisiana. This index uses data from the U.S. Census Bureau and the National Association of Insurance Commissioners (NAIC), based on 2018 figures.

Impact of Recent Reforms and Future Trends

Since 2018, Michigan has implemented reforms aimed at reducing auto insurance expenditures for its drivers. These reforms, along with potential future changes in other states, could significantly alter the affordability landscape. For instance, recent data from the NAIC indicates that the average auto insurance premium in Michigan has decreased by approximately 10 percent since the reforms were enacted. This trend, if sustained, could potentially shift Michigan's ranking in future affordability studies.

Addressing Affordability for Underserved Communities

While the IRC index provides valuable insights, it does not directly address affordability among underserved populations. A recent analysis of NAIC data showed that higher premiums in lower-income ZIP codes are often correlated with higher claim costs in those areas. Efforts to improve affordability must therefore focus on reducing these underlying costs. Key areas for improvement include accident frequency, repair costs, injury claim costs, attorney involvement, and claim abuse.

In conclusion, understanding the factors that influence auto insurance affordability is crucial for both policymakers and consumers. For consumers, it's important to shop around and compare rates, especially in less affordable states. For policymakers, addressing the underlying cost drivers can help make auto insurance more accessible to all.