|
Insurance > Car Insurance
Cars: Insurance
ANN M. JOB. Associated Press.
Copyright Associated Press
Gaze lovingly on that Pontiac Firebird convertible.
Yes, it's powerful, expressive. For some, it's the perfect road machine. At a starting price of around $25,000, it's just a couple thousand over the average new-car price these days.
But think again, beyond that price tag, to those insurance payments.
This soft top ranks among the most expensive in insurance rates, with an estimated $14,294 in insurance costs over five years, according to Intellichoice, an auto information research company in Campbell, Calif.
The Firebird line overall, which includes coupes as well as convertibles, ranks "worse than average" in Allstate Insurance Co.'s 1997 Make and Model Rating Program.
It's enough to make an auto company executive cry.
For as hard as the auto industry works to improve the safety and crashworthiness of its vehicles and to deter theft, trends seem to be taking away the gains that might, on first blush, benefit insurance rates.
"The future right now is mixed," said Bob Mankivsky, policy manager at the Schaumberg, Ill.,-based Alliance of American Insurers, a national insurance trade association representing more than 250 member insurance companies.
"Simply put, the cost factors that are driving auto insurance are more than just safety devices," he said. "We haven't seen much improvement in safety belt use, and we have higher speed limits now. And we're still dealing with poor driving behavior."
Critics blast insurers, charging the companies always seem to find reasons like these to avoid giving consumers a break on auto insurance rates, which these days average at least $750 a year nationally.
The issue even is attracting the attention of politicians, at both state and national levels. In New York and Chicago, campaigning politicians have made a point of criticizing auto insurance rates, noting that auto theft rates in those areas have declined, yet insurance prices haven't reflected the improvement. On many high-line vehicles now, auto theft deterrent systems are standard, not optional equipment, as automakers seek to reduce theft rates, too.
Mankivsky, however, says that insurance rates are computed based on total "loss cost," which includes more than whether thefts of certain vehicles are up or down.
"A major component of loss cost typically is the liability insurance," he said, noting that the trend continues toward automotive-related lawsuits.
Such suits force insurers to "spread the losses among all insureds," he said. That means your insurance rates continue to grow to absorb the insurance companies' legal and suit-related expenses. A study by the U.S. Congress Joint Economic Committee estimated litigation expenses amount to 28 cents of every dollar paid in auto insurance premiums.
This recouping of lawsuit expenses isn't new in the world of business, but it's troubling to many who watch the rising insurance rates with concern. U.S. House of Representatives Majority Leader Dick Armey, R-Texas, even introduced legislation that would create the first nationally available no-fault auto insurance policy.
Generally, insurers approve of no-fault plans because the plans would limit their exposure in lawsuits. But consumer groups and trial attorneys say such a system would leave motorists vulnerable and unable to seek justice and full compensation.
Beyond lawsuits and theft rates, though, there are other reasons why motorists might believe that insurance rates should be stabilizing, if not falling. For one thing, cars are getting safer, so there should be fewer and less serious injuries in those insurance loss costs.
It's true that cars are being fitted with more safety devices - shoulder belts at all seating positions, front air bags, side air bags, head air bags, two-wheel and four-wheel antilock brakes, traction control. And much is being learned about crashworthiness and being applied in the latest car designs.
But at the same time, the insurance industry looks at the seemingly constant one third of Americans who don't buckle up and who, therefore, face serious injury in crashes. "The thing that would probably cut injury rates the most is seat belt use," Mankivsky said.
Insurers also continue to look at historical factors and historical crash rates. So just because an innovation appears on the market doesn't mean it automatically is reflected in insurance rates.
For example, some GMCs this year have the first production application of high intensity discharge headlamps for trucks. The lights, which provide 2.7 times more light than conventional headlamps, should help drivers see better at night.
Before showing up on the new GMCs, these lights were tested for three years in off-road truck racing in Baja California. But does that mean they'll automatically qualify for an insurance rate break?
An insurance industry spokesman said no, the factors the industry examines are "verifiable research." Chances are the Baja races, with experienced race drivers and on race terrain, don't qualify as "verifiable research."
One auto industry official sarcastically called this the insurance companies' "five-year lag time where consumers are getting rooked."
BMW is one company that decided to tackle this issue head on a couple years back.
The maker of performance European automobiles went to insurance companies, showing its state-of-the-art technology, facts and figures on how these advancements should reduce claims costs in the future and asking how insurers could reflect these improvements and innovations in their insurance rates on new BMW vehicles.
One insurer, TIG Insurance Co., part of the property-casualty group owned by TIG Holdings, Inc., of New York City, took up the challenge and agreed to "look forward," as it were, rather than just at historical crash and loss data. The results are TIG rates for BMWs that are reduced by as much as 30 percent. But to this day, BMW has been unable to get any other insurer to provide the same program.
What are drivers to do if they don't drive BMWs?
Shop around periodically for auto insurance. There are several hundred insurance companies offering coverage in most states. Some also occasionally offer lower rates to get new business. You can even do this on the Internet.
Check your deductibles and weigh whether you want to have higher ones. In exchange for bearing more of the risk via higher deductibles, your rates can decrease.
Make sure you're getting the discounts you qualify for. While newer technology may not yet be factored into auto insurance rates, some older safety devices are, such as antilock brakes, automatic seat belts, air bags and anti-theft devices. Call your insurer and be sure the company knows if your vehicle has these items.
Take advantage of good driver rates. Companies often give breaks to drivers who haven't been involved in moving violations for several years and have clean driving records. Some offer "good student" rates. And they can refigure your insurance to account for a college student who's away at school without a car.
Discounts also are available, typically, if you don't drive the expected annual mileage or are in a carpool.
Of course, you could buy a low profile - and sizable - car. Not a sport utility, mind you. While most sport utilities are big and the general rule of thumb is a large vehicle performs better in crash tests than a small one, Mankivsky cautions that sport utilities "tend to be built to truck standards."
This means they "have lower safety standards" and don't provide the full safety coverage of a car, he said.
Combine that with their higher cost to buy and repair than some cars, and you can have a more expensive insurance bill, too.
For example, Intellichoice lists insurance for a Ford Taurus G at $6,703 over five years, while a Toyota 4Runner Limited 4WD is estimated at $10,156.
Insurers confirm that, generally, the sportier, faster, flashier cars carry even heftier premiums, and this has posed a problem for Pontiac and its Firebirds.
Jim Murray, Firebird brand manager, acknowledged that insurance costs "are a limiting issue for young kids," who have been a core part of the sporty, small car market the Firebird is in. The combination of "a muscle car and a 25-year-old" does not sit well with insurers, Murray said.
The insurance issues as well as the fact the Firebird market's core group of buyers, the under 35-year-olds, are moving toward pickups and sport utility vehicles prompted Pontiac to seek to reposition the Firebird for 1998.
"Firebird's demographic is evolving to an older, more affluent buyer, between 35 and 55 years of age," Murray said. "The children are gone, and this (buyer) grew up with muscle cars ... and he wants to get back into it."
Maybe this buyer can get a better insurance rate, too.
Reproduced with permission of the copyright owner. Further reproduction or distribution is prohibited without permission.
Companies: BMW AG (NAICS: 336111, 421110, 336991, Duns:31-536-9936 )
Text Word Count 1411
The tips on this website should be considered food for thought only. Lendingtips.com is a clearinghouse of ideas, not a professional adviser. Before any important decision, please consult the appropriate professionals (lawyer, accountant, real estate agency, broker etc.).
|
|
