High gas prices have dramatically decreased the amount of driving done by Americans – but that does not mean that auto insurance rates should go down. That’s the conclusion of a report by the Property Casualty Insurers Association of America (PCI). “It would be a mistake to assume that this [fewer miles driven] means there will be lower insurance claims reporting and as a result, lower insurance premiums for consumers,” Paul Magaril, regional manager and counsel for PCI, said in a statement.

Recently, New York Insurance Superintendent Eric Dinallo ordered all automobile insurers with pending rate filings at the state insurance department to submit a supplement about the impact of reduced driving due to high gas prices before the department approves any filing. Geico and Geico General — together, the state’s largest insurer — withdrew a previously filed rate request following discussions on reduced-driving behavior with the New York State Insurance Department.

The Federal Highway Administration estimates total vehicle miles driven nationwide during the first five months this year fell 2.5 percent, compared with the same time last year. With these statistics, it has been said that there will be fewer auto accidents, resulting in the chance for insurers to lower rates.

Magaril said PCI encourages Dinallo “not to draw overly broad conclusions based solely on assumptions being drawn by consumer groups regarding the number of miles driven.” Even though frequency has dropped, the cost to repair a vehicle is more costly, he said. One factor not addressed: the fact that miles driven is standard underwriting criteria used in setting rates.

August 19, 2008