N.D., S.D., Iowa Drivers Enjoy Lowest Auto Premiums: NAIC Report

Drivers in most of the 12 states that comprise the Midwest region enjoy lower average auto insurance premiums than their counterparts in other regions of the country, according to the most recent study produced by the National Association of Insurance Commissioners (NAIC).

In NAIC’s “State Average Expenditures & Premiums for Personal Auto Insurance in 2003,” North Dakota drivers enjoy the lowest average auto insurance premiums in the nation, with an average annual auto insurance expenditure of $536.30–35 percent lower than the national average of $820.91.

In spite of some market improvements and legislative reform, New Jersey continues to be the state with the highest average expenditure, at $1,188.42. Other costly states include New York, at an average expenditure of $1,160.80, and the District of Columbia, at $1.129.31.

According to the study, North Dakota is the least expensive state, followed by South Dakota, at an average expenditure of $563.18, and Iowa, at $580.15.

In its report, the NAIC cautions against direct comparisons between state results. Three variables–urban population, miles driven and disposable income per capita–are highly correlated with the numbers. Other variables that can affect state-to-state differences in average expenditures and premiums include underwriting and loss adjustment expense, accident rates, traffic density, auto repair costs, liability insurance requirements and auto laws, such as those relating to seat belt use and speed limits. The NAIC report does not represent all such variables.

The numbers bear this out: in general, states like North Dakota, South Dakota and Iowa have lower populations living in more densely populated metropolitan areas, and also have drivers who travel fewer miles of roadway.

For example, only 55.8 percent of North Dakota drivers live in urban areas, compared with 94.3 percent of New Jersey drivers who live in cities. Similarly, North Dakota drivers in 2003 traveled well under half a million miles per mile of roadway, compared with District of Columbia drivers, who averaged a whopping 2.70 millions of miles per mile of roadway and virtually all (100 percent) lived in metropolitan areas.

Two exceptions to the moderate Midwest expenditures are Michigan and Minnesota, the only two Midwestern states with average expenditures over the countrywide average. Michigan’s average expenditure was $931.14 for 2003, while Minnesota’s was $836.12. Both states have moderate metropolitan populations–Michigan had 74.7 percent of its population in metropolitan areas, while Minnesota had only 70.9 percent. Millions of miles driven per miles of roadway were moderate as well: Michigan drivers covered 0.82 miles, while Minnesota drivers only 0.55.

One possible explanation for this discrepancy for Michigan could be the high population density in Detroit, coupled with higher crime rates and fraud.

In general, auto premiums countrywide have shown a gradual increase from 1999 to 2003.

In 1999, the average expenditure was $685.09, going to $689.27 in 2000, $723.11 in 2001, $776.78 in 2002 and $820.91 in 2003.

NAIC gleans the report’s statistics from a variety of sources, including the American Association of Insurance Services, ISO Data Inc., the National Independent Statistical Service, and the Property Casualty Insurance Association of America.

Average Auto Insurance Expenditures 2003
Most Expensive
1. New Jersey ~ $1,188.42 2. New York ~ $1,160.80
3. District of Columbia ~ $1,129.31