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Car Insurance Rates Up 43% in Two Decades

Christine DiGangi

Americans spend an inflation-adjusted 43% more on auto insurance than they did in 1989, with rates in some states jumping 80%, 90% or 100% in the past two decades, according to a report from the Consumer Federation of America. California was the only state to see average insurance payments decline since 1989.

The report examines data from 1989 through 2010, the most recent data available on the topic. California’s decline of 0.3% significantly brought down the national average 43% increase — only 14 states, including California, had increases below the national average. (The District of Columbia also did.) Wisconsin residents saw a 56% increase in car insurance expenditures, which was the median increase, and the change was the worst in Nebraska, where car insurance expenses increased 108.1% over a decade.

How car insurance expenses changed over time was related to the way the states regulate the industry. The report categorized state’s regulatory systems from strongest (prior approval required to raise rates) to weakest (deregulated, with no state review of rates and no filing requirement).

The report shows, in general, states with weaker regulation had higher rate increases.

The report concludes that stronger regulation leads to lower car insurance rates and highlights California as an example of this. It also notes that California is one of three states that bans use of credit scores in determining insurance rates. In other states, a consumer’s credit history is factored into how much they pay for car insurance.

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