The frequency of auto insurance claims is a major reason for higher auto insurance prices in urban areas, a study funded by the insurance industry states.
The study compared factors affecting insurance costs in 18 cities with averages in 13 states. Comparisons among cities were not part of the study. Eight of the 26 largest cities were eliminated from the study.The study was conducted by the New York-based Insurance Services Office, an industry-owned rate-making and advisory group, and the National Association of Independent Insurers, a trade group based in Des Plaines, Ill.
The groups said they conducted the study to answer the question: Why do drivers in some cities pay such high premiums for auto insurance?
The answer is fundamental, the study states. It costs insurers more to provide personal auto insurance coverage in these cities than it does elsewhere.
The high-cost cities named in the study are Baltimore; Boston; Chicago; Cleveland; Detroit; Los Angeles; Miami; Newark, N.J.; New York and Philadelphia. The low-cost cities are Columbus, Ohio; Jacksonville, Fla.; Nashville, Tenn.; San Diego; San Jose, Calif.; and Seattle.
The study classified insurance costs in two cities, Milwaukee and San Francisco, as neutral compared with their states.
Philadelphia led the list of high-cost cities. Insurance companies said they pay four times as much for liability claims per car there as they do in Pennsylvania.
The study also found that higher numbers of bodily injury claims - not claims for damage to cars and other property - were a major contributor to higher auto insurance costs.
The loss costs used in the study include insurer payments for doctors' fees, hospital care, funeral expenses, auto repair and replacement parts, lost wages and lawyers' fees, and pain and suffering.
The non-insurance information used included population, vehicle densities, use of mass transportation and auto theft data.
To some extent there are outside factors that force the rates up. But one- third of the cost is their (the insurers') overhead, said J. Robert Hunter, president of the National Insurance Consumer Organization, a consumer advocacy group.
We've known these things for years, he said. This is not going to stop the outcry for relief and it doesn't stop the problem.
Mr. Hunter said insurers must do more to control some of the outside factors that raise insurance costs, such as ad campaigns to reduce auto accidents.
They haven't done all they can, he said. You have to remember that any study that is proposed by one side is going to have a bias.