In Connecticut And Nationally, Car Insurance Rates Revving U

May 3--Rate increases for auto insurance are picking up speed, and consumers already sideswiped by the troubled economy are looking for a better deal.

Premiums are expected to rise roughly 4 percent in 2009 on a national average -- not a huge jump, but the largest increase in six years -- as insurers grapple with financial pressures and try to boost profits. Auto insurance costs had been relatively stable or declining since 2003.

Many consumers in Connecticut and across the nation have already seen premiums climbing in their policy renewal bills, and they want to do something about it, agents say.

"People are shopping around now more than they have in years past; everybody wants to save money," said Shannon Rabbett Hollman, an agent at The Rabbett Insurance Agency in Windsor.

Insurers are raising rates because of higher claim costs and deteriorating investment results. But explaining to accident-free consumers that their higher rates subsidize people who file claims "doesn't usually fly," said Hollman, vice president of the trade group Professional Insurance Agents of Connecticut. "Nobody wants to hear that."

It wasn't a single big rate jump that sent Byron McClanahan of West Hartford searching for a better deal, but after his premiums mounted over the years, he suspected he could find lower rates.

"It's the economy, and like many of us, I'm examining everything," said McClanahan, a sales manager for local radio stations. He's switching his home and auto insurance from The Hartford's AARP program after about six years to OneBeacon Insurance Group in Canton, Mass., and saving $482 a year on the auto policy alone.

Agents note that an insurer with the lowest premiums for one consumer may not be the cheapest for another driver because of differences in rate-making, claims experience in each region of a state and other factors.

The rates haven't risen in recent years because accidents are becoming more frequent but because the severity of claims -- the average cost per claim -- has crept up. It's fueled by higher auto body repair and medical expenses, said Robert P. Hartwig, president of the industry's Insurance Information Institute.

Some insurers, however, have found that a lower frequency of auto claims in recent years has largely offset higher severity. The Travelers Cos., for instance, reported the overall trend in its personal auto claims was relatively flat from 2006 through 2008, as frequency dropped and severity increased slightly.

Insurers are more troubled by investment performance these days because, historically, they've relied on investment income along with premiums to cover claim costs. But low interest rates and shrinking or disappearing dividends on the stocks they hold are reducing their investment returns, Hartwig said.

"If returns are expected to remain lower, they will need to earn more on the premium side," he said.

In addition, U.S. property-casualty insurers scored a record $19.8 billion of realized capital losses on deflated investments last year. Overall, the industry's net profit dropped to $2.4 billion, a 96 percent decline that also reflected price competition and major storm claims.

So it's not surprising insurers are in a rate-raising mood. The Consumer Price Index for auto insurance was up 4.4 percent in March compared with a year earlier.

In Connecticut, 18 auto rate increases averaging 4 percent had been approved by the state Insurance Department as of April 22 or were too small to require approval. Last year's increases averaged 2.8 percent. The increases each year for drivers who carry only liability insurance are somewhat higher.

This year's crop of rate increases in Connecticut includes the Nationwide companies, ranging from 5.1 to 5.7 percent on a statewide average, and 5.3 to 6 percent for various GEICO companies, according to the state Insurance Department. Increases could be higher or lower depending on where in Connecticut you live and any changes in your driving or vehicles.

The Hartford says it has increased rates about 2.5 percent on average for personal auto insurance in the state since January 2008. Travelers raised rates here an average 2.8 percent on policies in its "Quantum" program starting in December and increased rates 1.9 percent on another auto program last year.

The largest rate increase to take effect here so far this year was an average 16.7 percent by American International Pacific Insurance, a unit of federal bailout recipient American International Group that had some smaller increases last year.

Consumers seeking relief from higher rates should consider accepting higher deductibles and shopping around but shouldn't rush to reduce the amount of liability insurance in their policy.

Rob Bouvier, president of the Bouvier-Beckwith & Lennox Inc. agency in West Hartford, and other agents warn that you could lose assets -- like your home and savings -- in a lawsuit if you cause an accident and your insurance isn't enough to pay for injuries incurred.

Cutting corners on insurance, Bouvier notes, can mean "paying a much higher price later."

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