State’s rates on rapid rise
Auto insurance premiums in Colorado rose at the third-fastest rate of any state in the country and at more than three times the pace of inflation over the past six years, according to a new rate survey.
“Colorado has seen a pretty significant increase in overall premiums,” said Neil Richardson, a registered insurance agent with The Zebra, an insurance search engine behind the Zebra State of Auto Insurance 2018.
Colorado’s 54.2 percent increase in the average premium between 2011 and 2017 lagged only Montana at 64 percent and Mississippi at 60.3 percent and outstripped the 20 percent gain measured nationally. Those hikes don’t account for costs from the May 2017 hailstorm that hit the metro area, which caused a record-setting $1.4 billion damage, but that event can only drive costs higher in the future.
Individual premiums can vary widely based on the car, miles driven, a driver’s record and the types of coverage sought. To account for that, the
study looked at what a single male, age 30, with a good driving record insuring a 2013 Honda Accord EX would pay. The same policy was priced across the country, down to ZIP codes.
When Colorado abandoned the no-fault insurance system in 2003, premiums fell from eighth-highest in the country to the middle of the pack, said Carole Walker, executive director with the Rocky Mountain Insurance Information Association. Nofault required insurers to pay their customers’ medical costs regardless of who was at fault in an accident, but now the insurer covering the driver found at fault must pay. Premiums typically are higher in no-fault states.
“We were in this grace period after no-fault, which took away mandatory coverages,” Walker said. “Colorado is now on this collision course. There are some factors we can control and some we can’t.”
Colorado’s premiums, although rising rapidly, have a ways to go to get back into the top 10 again, according to the study. The state ranked 18th with an average premium of $1,435 under the scenario studied, Richardson said.
But back in 2011, that premium was $944 a year. And the hikes are piling on rising living costs, especially for housing.
Jordan Smith of Denver saw her six-month premium go up from $384 in 2016 to $420 in 2017. Given all the accidents she was seeing on her commute to Boulder, the increase wasn’t a complete surprise, she said.
But then in 2018, her premium shot up 28 percent, even after she had replaced her leased 2014 Mazda 6 with a much less expensive 2005 Subaru Legacy, a move she thought would help bring her premium down.
“My most recent renewal notice of $538 was a bit of a shock. Instead of adjusting my budget, I decided to shop around and got something closer to what I was paying before,” said Smith, who got her premium back down to $440.
Experts offer several reasons to explain the big increases. A streak of bad weather, primarily heavy hailstorms, have required large payouts. Colorado has ranked second only to Texas for hail-damage claims in recent years.
Lower gasoline prices have resulted in more people on the road, and the northern Front Range has seen an influx of newcomers. More traffic means more accidents and more claims and higher premiums.
Distracted driving remains a big problem, despite repeated campaigns to get people to stop using their mobile devices while driving. And there’s some evidence that legalized marijuana is having an effect on premiums, Richardson said.
“In every state where recreational marijuana has been legalized, with the exception of Massachusetts, car insurance rates have in- creased,” he said.
Between 2016 and 2017, premiums rose an average of 3.2 percent in states where recreational marijuana was legal, but only 1.6 percent on average in states with a full ban still in place.
Vehicle repair costs are a big factor. Newer vehicles come with more expensive cameras and sensors in their bumpers and windshields designed to reduce severe accidents. The trade-off is that minor repairs that used to cost hundreds of dollars, such as a bumper replacement, can now run thousands of dollars.
As premiums rise, more people lower coverage levels or drop policies entirely, despite the penalties they face if caught. Some of the steepest increases are coming in coverage for uninsured motorists.
About 16 percent of drivers in Colorado are driving without insurance, Walker said, adding that for some people, the choice comes down to making the rent or paying for groceries.
Insurers also point to more litigation and larger awards, due in part to changes trial attorneys sought and the legislature approved after the no-fault system was disbanded.
“We started seeing the attorneys attack the honey pot,” Walker said. “We need some major reform if we are going to make a difference.”
Insurers sought and failed last year to change the ability of claimants to file against multiple uninsured motorist policies within a household, known as stacking. Insurers also want juries to see not only the initial charges for medical care, but also the actual amount paid, which can come in much lower.
Sommer Luther, president-elect of the Colorado Trial Lawyers Association, said the medical insurers have negotiated those lower rates and if the injured party didn’t have an outside policy, they would have paid the higher rates.
Luther said few auto accident cases go to a jury trial. Most are settled and when a case goes to a jury, pain and suffering damages in Colorado are capped at $500,000.
“There really haven’t been any studies that have shown that litigation or lawsuits increase premiums to the insured,” Luther said.
Colorado’s auto insurance market remains highly competitive, with more than 150 companies underwriting auto policies in the state in 2016, according to the Colorado Division of Insurance.
About 25 of the largest 150 insurers active in the state paid out more in claims than what they collected in premiums in 2016, including two of the 10 most active policy underwriters.
“Some companies are paying out more in claims than they’re taking in with premiums, but that is why they are increasing premiums,” said Vincent Plymell, a spokesman for the Colorado Division of Insurance.
Based on their claims, Plymell said some insurers could have requested even bigger premium increases, but didn’t.
Along just the Front Range, the Zebra study found variations in auto premiums for its hypothetical policy from Loveland at an average premium of $1,215 a year to Conifer at $1,624.
State-to-state variations are much larger, with the same hypothetical buyer in Michigan paying $2,610 a year but only $865 a year in North Carolina, according to the study.