Car Insurance Rates Take Slide State Farm's Good Fortune Translates into Lower Auto Insurance Rates

By Comerford, Mike | Daily Herald (Arlington Heights, IL), January 22, 1998 | Go to article overview

Car Insurance Rates Take Slide State Farm's Good Fortune Translates into Lower Auto Insurance Rates


Comerford, Mike, Daily Herald (Arlington Heights, IL)


Byline: Mike Comerford Daily Herald Business Writer

Auto-insurance bills across the suburbs have been turning south in response to, among other factors, safer driving habits.

It is part of a national trend among insurance companies that are experiencing record profits as claim payouts drop.

It is also a marked change from the 1980s when premiums climbed precipitously.

Bloomington-based State Farm Mutual Automobile Insurance Co. is dropping its average car insurance rate in Chicago's suburbs by 5.3 to 8 percent for the first six months of this year.

That follows State Farm's November announcement that it is paying the largest dividend in its history to car-insurance holders, equal to 16 percent of their bills. All of which amounts to about $118 million to an estimated 2 million policy-holders, or about $53 a policy.

The average State Farm auto-insurance policy cost is $1,067 in the Chicago area and $679 for the rest of Illinois, according to the company. The company insures about a third of all cars in the area.

"There has been a decrease in claims and accidents and a number of factors," said John Wiscaver, a spokesman for State Farm. "We're passing along those savings."

However, while companies such as State Farm can boast of declining premium rates, consumer groups say most insurance companies are slow to pass along the savings.

In most cases, said Robert Hunter, an insurance analyst for the Consumer Federation of American, insurance companies are simply slowing the rate of increase to between 2 and 3 percent a year, comparable to the inflation rate.

"Premiums should be going down because insurance companies are making excessive profits these days from car insurance," Hunter said.

An industry standard, Hunter said, is for an insurer to lose up to 5 percent on the policy itself but make 10 to 12 percent on the investment of premiums.

However, under current conditions, he said, insurers are generally showing a profit of 2 percent on the policies and 15 to 18 percent on investments. …

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