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Auto Insurance Article

Most Expensive Cities for Car Insurance

See where it's most expensive to insure your ride.

By Terence Loose    

Like real estate, auto insurance rates are all about location, location, and location. But why does location make a difference?

"Auto insurance tends to be more expensive in urban areas because of the higher density of traffic, increased likelihood of theft and vandalism, and greater incidence of fraud in cities," says Loretta Worters, vice president at the Insurance Information Institute (III).

We looked to a Runzheimer International analysis of the most and least expensive cities for automobile insurance, which was based on business driving for a 2012 Chevrolet Malibu LS.*

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Want to know if your city made the list for highest average premiums? Keep reading.

#1 Most Expensive City - Detroit, Mich.
Average Annual Premium: $5,941*

Ironically, Detroit, Mich., the city synonymous with cars, also has the perfect storm of auto insurance inflation. First, it's an urban area. Second, it has a high crime rate - it scored an 889 on the City-Data.com 2010 crime index, compared with the U.S. average of just 266.

And third: "Michigan's unemployment rate is nearly 15 percent, the highest in the nation," says Worters. "That also plays a role in the state's car insurance rates, because more and more residents are letting their car insurance lapse despite the mandatory coverage law. More uninsured motorists means higher rates."

And to add fuel to the storm, Michigan's no-fault auto insurance system offers unlimited medical care to injured persons, regardless of fault. "As a result, the Michigan Catastrophic Claims Association now covers the medical bills of nearly 13,000 accident victims. This generous system is expensive," says Worters.


#2 Most Expensive City - Philadelphia, Pa.
Average Annual Premium: $4,076*

Unfortunately, the City of Brotherly Love is anything but warm and fuzzy when it comes to auto insurance. Philly suffers from many of the same ills as Detroit - it is urban and has high traffic density.

And according to "Top 5 Ways to Save on Auto Insurance," published by J.D. Power and Associates, "most accidents happen in larger cities, which means if you are a city-dweller, expect higher rates."

"There are also a lot of uninsured drivers in Philadelphia, and that has the same impact as in Michigan: high premiums," says Worters. What's worse, high premiums could lead to more uninsured drivers… it's a vicious cycle that keeps rates spiraling upward.

Philadelphia's personal injury loss costs are also dramatically higher than other cities, adds Worters. These costs represent the payouts that insurance companies make for bodily injury (BI), personal injury protection (PIP), and uninsured motorists (UM) claims.


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#3 Most Expensive City - New Orleans, La.
Average Annual Premium: $3,599*

New Orleans makes the top five cities for expensive car insurance for slightly different reasons than the first two cities: the state's court system.

In Louisiana, only cases with claims in excess of $50,000 get jury trials. As a result, many cases are settled for $49,000 - driving up insurance costs, says Worters.

And in addition to the monetary threshold for jury trials, Louisiana has traditionally had higher bodily injury rates and more lawsuits per capita than most states, according to the Insurance Information Institute.

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#4 Most Expensive City - Miami, Fla.
Average Annual Premium: $3,388*

That beautiful aquamarine ocean that gives Miami its fame also has something to do with its high auto insurance premiums. Statistics from the National Insurance Crime Bureau indicate that port cities have a higher rate of auto theft, and Miami is no exception.

"Miami has a high rate of car theft," says Worters. "It also has a high rate of uninsured drivers, much like Philadelphia."

Miami is also the most populous city in the southeastern United States - a fact that insurers don't care for since more congestion can lead to higher rates of traffic accidents, Worters says.

Then there's the fact that Florida, like Michigan, has a no-fault insurance system. This has led to a rise in fraudulent claims, which in turn, is leading to higher premiums. In fact, according to III projections, Florida drivers will pay $658 million in higher premiums in 2011 due to auto insurance fraud.


#5 Most Expensive City - Newark, N.J.
Average Annual Premium: $2,867*

Fun fact: New Jersey has more lawyers per capita than any other state. And when the lawsuits are auto accident related, the outcome is a lot of bills for insurance companies, which means they must charge more in premiums to stay profitable.

"In some instances, attorneys' fees in arbitration cases exceed the value of the award," says Worters. "So insurers in the state now spend more on no-fault-related defense costs each year, relative to premiums collected." These "defense costs" include attorneys, investigation, and arbitration.

In 2009, defense costs in New Jersey were 16 percent of premiums, compared with 7 percent nationwide, adds Worters.

Thanks to this - and other factors - Newark makes the list of costliest cities to insure a car.

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A Brief Look at the Least Expensive Cities for Auto Insurance…

At the other end of the spectrum are cities with features such as low crime rates, low population and density, and strict driving laws - all factors that could lead to lower auto insurance rates.

Here are the five U.S. cities with the lowest car insurance premiums:

#1 Least Expensive City - Roanoke, Va.
Average Annual Premium: $937*

#2 Least Expensive City - Green Bay, Wis.
Average Annual Premium: $999*

#3 Least Expensive City - Wapakoneta, Ohio
Average Annual Premium: $1,008*

#4 Least Expensive City - Portland, Maine
Average Annual Premium: $1,053*

#5 Least Expensive City - Boise, Idaho
Average Annual Premium: $1,065*

*Source: Runzheimer International. Average insurance rates are as of August 2011, and based on business driving for a 2012 Chevrolet Malibu LS. Assumes $100,000/$300,000/$50,000 liability limits, collision, and comprehensive with $500 deductibles, 100/300 uninsured motorist coverage, and any mandatory insurance coverage.


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