Auto Premiums Drop, So Take Another Look

Peter Brink

Memorial Day weekend marks the official start of the summer driving season -- time to get your car serviced if you want to wring every last mile per gallon out of the family SUV. It could also be a good time to shop around for automobile insurance, as rates are coming down a bit.

As a group, the property and casualty industry -- which, in addition to autos, also insures houses and other kinds of personal property -- delivered strong financial results for 2006, thanks to one of the mildest hurricane seasons in years. Insured catastrophe losses fell to approximately $8 billion from roughly $62 billion in 2005.

While this year's hurricane season is expected to be much more active, auto insurers still seem poised to pass along at least some of last year's savings. The softening in premiums hasn't been as widespread as some might have predicted; insurers are cutting rates where necessary, rather than making an aggressive play to gain market share, as they have in the past.

But companies are really focused on the risk factors each customer presents. That means you may benefit by having a clean driving record with no recent moving violations or accidents on your record.

Many factors have contributed to making the automobile line of business more profitable. Firstly, vehicles are safer now than they were 10 years ago. Many models come standard with side-impact airbags and other safety features that make you less likely to be seriously injured in an accident. Secondly, stricter driving-under-the-influence laws and enforcement are starting to show up in lower loss costs for carriers.

At the same time, the increasingly litigious environment in the U.S., combined with larger jury awards, means people are more likely to sue in the event they are seriously injured in a car accident.

These are all reasons to insure your automobile with a financially strong company. Our rating methodology takes into account many factors, including an insurer's level of capitalization, profitability trends, geographic diversifications, adequacy of its loss reserves, concentration of business by line of business and many other factors.

The top three automobile insurance companies, based upon the volume of direct premiums written, on our recommended list are: State Farm Mutual Automobile Insurance, Allstate Insurance (ALL) and GEICO General Insurance. All three earned ratings of B+ (good financial strength) or higher.

The highest-rated insurers on our list have scored well on all of the components we use to measure financial strength. The highest-rated insurers in this group, those in the A-rated category, tend to be well diversified both geographically and by line of business. These companies are also very well capitalized and consistently profitable.

A few of the companies on the list also offer the mutual form of ownership, in which the company is owned by the policyholders as opposed to the stockholders. Mutuals have historically been run to build financial strength and offer reasonably priced products, as opposed to stock companies, which are established to benefit shareholders in the form of a higher stock prices and/or dividends.

The nation's 10 largest automobile writers are below. Many write business in multiple states and may write in yours. Contact them directly or through their respective state insurance department to check them out. The ratings section of our Web site can also help you locate a particular carrier.

10 Biggest Auto Insurers Volume of direct premiums written in 2006
	Company Name	Home State	Strength Rating	Automobile Premium ($ US)
1	State Farm Mutual Automobile Insurance	IL	B+	28,042,815,000
2	Allstate	IL	A-	8,366,619,000
3	Geico General Insurance	MD	B+	4,555,646,000
4	Government Employees Insurance	MD	B+	3,348,722,000
5	United Services Automobile Association	TX	A+	3,313,033,000
6	Geico Indemnity Insurance	MD	A-	2,578,224,000
7	USAA Casualty Insurance	TX	A+	2,156,013,000
8	Interins Exch of the Automobile Club	CA	A+	1,903,784,000
9	California State Auto Association	CA	A-	1,546,390,000
10	Commerce Insurance	MA	B+	1,442,687,000
Source: Regulatory Filings

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