SATURDAY, SEPTEMBER 17, 2011
Analysis of Why Auto Insurance Rates in Illinois Differ Than Rates in Other States
by Ed Sneneh, Illinois Auto Insurance Broker
Auto insurance rates are based on several factors that make them unique. This article sheds some lights over the factors that make auto insurance rates in Illinois, primarily auto insurance rates in Chicago area, different than other states.
State Laws. States impose different limits of insurance for bodily injury and property damage. In Illinois, for example, the minimum limits are $20,000 bodily injury per person, $40,000 bodily injury per accident, and $15,000 property damage per accident. In the State of Indiana these limits are $25,000/50,000/10,000; respectively. Higher limits means higher insurance premiums.
No Fault Insurance, where insurance company picks up insured's medical expenses, rehabilitation expenses and lost wages up to the amount the insured purchased, regardless of who is at fault in any car accident, is generally more expensive than auto insurance that follows the traditional tort system where the faulty driver has to pay. Illinois is not a state that follows the No Fault Insurance system.
Communities and Auto Insurance Rates. Large communities have normally higher loss and accident rations (busy life styles, stressed drivers, busy roads, constructions, etc.) Large metropolitan areas such as Chicago, New York, Los Angeles, etc. are classified as higher risk areas that smaller communities, or suburban areas. Some companies, especially commercial auto insurance companies, may use the County as a base for rating, while others may use individual ZIP codes for rating base.
Garaging ZIP is a significant factors for commercial auto insurance. In personal auto insurance the garaging ZIP codes could make a hundred or two hundred dollars difference in annual premium for an auto. For a trucking company with 20 truck tractors garaged in the City of Chicago, moving farther south to Will County or another county could make fifty thousand dollars, perhaps more, every year, with many trucking companies. Moving to Indiana could even save more on truck insurance premiums.
Crime And Auto Insurance Rates. Communities with high crimes tend to have higher rates for auto insurance. People who live in high risk communities or communities that are adjacent to high risk communities normally pay higher auto insurance rates.
Competitive Forces. Larger communities tend to have more auto insurance companies fighting to get customers. More companies mean more competition. Normally this means lower prices, but perhaps on the expense of claim paying practices.