High Gas Prices Could Drive Down Auto Insurance Rates

August 5, 2008

Americans have been hurting financially for awhile now, and this fact hasn’t been more emphasized than in 2008. With a rapidly inflating dollar driving up the costs of food and other consumables, and a growing global demand for oil, the cost of living have shot way up for the average U.S citizen.

Gas at the pumps has reached $4 a gallon as of July 2008, and this has made it difficult for most people to drive as frequently as they used to. Having to pay more at the pump means people are driving more conservatively and spending less time on the road. While this may have its negative implications, there is a strong positive factor to these circumstances that may very well benefit drivers in the future.

Put simply, if people in general were to drive less, than the rates on auto insurance would go down. While this was once an idyllic thought, the struggling economy has made this estranged possibility a growing probability as more and more people cut back on the driving they do daily. When they stop driving as much, the number of claims reported drops steadily as well, and when that happens, Insurers typically lower the rates on their premiums in order to stay competitive in the marketplace.

The FHWA, or Federal Highway Administration, has reported a few months ago that Americans are currently driving less than they ever had in decades, with the overall number of vehicle miles traveled having dropped 4.3% compared to this time last year. This is the sharpest dip the number has taken since the Federal Highway Administration has started keeping track of traffic in 1942.

Auto insurers are easily the first group to recognize and respond to the changes taking place on the road. When a company sees the number of claims drop over time, they can quickly adjust their rates to suit the trends. Of course, this sort of thing varies by state because the laws differ, but generally speaking, once the number of people on the road start diminishing, you can be certain that the cost of insurance will follow.

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