Uninsured Motorists to Increase in 2010

Drivers May Drop Car Policies Due if Economic Crisis Deepens

Jan 24, 2009

One in six drivers will let their auto insurance policies lapse by 2010 due to the recession, according to the Insurance Research Council (IRC).

With the downturn of the economy, who isn’t tightening the belt. Millions cut back on frivolous spending, and some others are just too strapped for cash to pay the bills. The consensus is to stay afloat by paying the necessities like utilities, transportation, and the mortgage or the rent. Oftentimes, the compromise these customers make translates into delinquencies with credit card bills, student loans, and car insurance. That’s right, car insurance.

Although it is illegal to drive without car insurance, a number of drivers do in spite of the consequences. As if ignoring the requirement will eliminate accountability. This kind of mentality can be expensive. Penalties for getting caught may result in hefty fines, possible suspension or revocation of a driver’s license and the vehicle’s registration. Uninsured drivers may also experience a hike in their insurance premiums. Not to mention the additional penalties if an accident occurs.

Adding insult to injury, “Responsible drivers who purchase insurance end up paying for injuries caused by uninsured drivers,” said Elizabeth Sprinkel, senior vice president of the IRC. However, financially strained consumers looking for some assistance have another option, called multi-policy discounts or bundling. The J.D. Power and Associates estimate that more than 90 percent of customers who bundled home and auto insurance policies were more inclined to renew those policies.

"Bundling multiple policies delivers benefits to both policyholders and providers,” explained Jeff Leiman, senior director of the insurance practice at J.D. Power and Associates. “The practice allows providers to capture additional business, and policyholders to qualify for additional discounts.”

Pay-as-you-Drive is a Great Way to Save

Customers who do not wish to bundle should shop around. Because there are a number of discounted and customized insurance products out there, like the pay-as-you-drive (PAYD) policy option. Not all insurance providers offer this program, but GMAC, Progressive, and MileMeter do. Just as the name implies, PAYD is usage-based insurance. Whereby the insurance premiums are based on the distance traveled and how often the vehicle is used.

The Brookings Institute suggests that PAYD policies lowers premiums and the number of accidents. The organization cited that most low-income customers would see their rates decrease because they are more inclined to use alternate forms of transportation. And those who drive less than average would save up to several hundred dollars per vehicle.

One good example of this kind of program is Progressive’s My Rate. The MyRate program uses a tabulation device that plugs into the car’s diagnostic port. It tracks the number of miles driven, the time of day, and how aggressively the car is driven. Every six months the driver sends the device to Progressive to calculate the insurance rate.

MyRate is available in Alabama, Kentucky, Louisiana, Michigan, Minnesota, Maryland, New Jersey and Oregon. To date, nearly “…one-third of its new customers are volunteering for pay-as-you-drive pilot programs,” a Progressive spokesperson said in an article published in The Los Angeles Times in July of 2008.

Recessions can be tricky to navigate and high insurance rates can be frustrating to drivers with empty pockets. That's why bundling and pay-as-you-drive options are great alternatives to traditional insurance policies. Each is said to save drivers money, while giving them the coverage they need just in case something unexpected happens on the road.

The copyright of the article Uninsured Motorists to Increase in 2010 in Automotive Insurance is owned by Katina Clayborn. Permission to republish Uninsured Motorists to Increase in 2010 in print or online must be granted by the author in writing.