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Auto Insurers: Hardly Progressive

Why Effective Safety Features Aren’t Driving Premiums Down

Consumers are driving the safest automobiles ever, but most of them don’t receive premium discounts for doing so, despite research that backs up the safety of these vehicles’ systems. Consumers Digest found that automobile insurers are reticent even to discuss discounts for safety systems.

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An upsurge in automotive safety features has resulted in the safest vehicles ever on U.S. roads. Nearly all automobile insurers, however, don’t provide premium discounts to drivers who own vehicles that have the latest safety enhancements, such as forward automatic braking and automatic steering (lane-keeping) that activates if your car veers out of a highway lane.

Such discounts would help to counter the increase in the average annual automobile insurance premium, which rose to $926 in 2016 and was up 17 percent since 2009, according to Insurance Information Institute (III), which is a trade group. This compares with an 11.9 percent increase in the Consumer Price Index over the same period. Unfortunately, insurers continue to resist providing safety-related discounts in this time of rising premiums.

KEEP SAFE. Of course, advanced safety systems aren’t found only on luxury vehicles. Even a few economy cars now have adaptive cruise control or blind-spot detection. The cutting-edge technologies aim to reduce the frequency and severity of automobile accidents and the injuries, fatalities and property damage that they cause.

For the most part, the advanced safety systems achieve this goal. Insurance Institute for Highway Safety (IIHS), which is supported by the insurance industry and collects information on 85 percent of all U.S. automobile accidents that result in an insurance claim, reported in August 2016 that forward-collision-avoidance systems that include forward automatic braking cut rear-end crashes in half in 2014 from 2010. Forward-collision warning alone reduced crashes by 27 percent. An IIHS study of Volvo XC90’s forward-collision-avoidance system, which is called City Safety, found over the same period that the system reduced rear-end crashes that involved XC90s by 42 percent and rear-end crashes of XC90s that resulted in injuries by 47 percent.

“The two safety features that have shown the most consistent results in reducing accident frequency are forward-collision-warning systems alone and in combination with autonomous emergency-braking systems,” says Russ Rader of IIHS. “We’re also starting to see some positive effects from blind-spot-monitoring devices. Rear cameras are standard on virtually all new cars now. They can make a difference in reducing backover crashes, because they can reduce the rear blind zone for vehicles by 90 percent.”

STUDY AND WAIT. When insurance prices rise, all policyholders are affected. According to Treasury Department, at least 18 million Americans live in an area where automobile insurance has become unaffordable for most consumers. “For low-income drivers in these regions, even those with spotless driving records and no driving accidents, this cost is too much to bear,” says Amy Bach, who is a co-founder of United Policyholders, which is an insurance consumer advocacy group. 

Experts tell us that relief might come if premiums were discounted based on the aforementioned safety features. Insurers would benefit, too. “By incentivizing consumers to drive safer cars, the lower accident-frequency rate would largely accrue to the insurance industry’s bottom line,” says Robert Hunter of Consumer Federation of America.

None of the top five U.S. automobile insurers—Allstate, Geico, Progressive, State Farm and USAA—provide discounts for advanced safety systems. Liberty Mutual launched a pilot program for customers in Illinois in April 2017, whereby drivers of a Volvo XC90 that includes the City Safety forward-collision-avoidance system can receive a premium discount of up to 10 percent. Assuming that the pilot program’s results are positive, the insurer plans to roll out the discount nationwide.

We asked the top five insurers whether they plan to provide premium discounts to encourage consumers to drive vehicles that have advanced safety systems. All of them declined to discuss the subject. Geico referred us to IIHS, but Rader says IIHS isn’t in the business of insurance premiums and has “no expertise or information on how these [safety] features might affect premiums.”

What’s inconsistent is that insurers extoll the virtues of automobile safety systems while they simultaneously express caution. “We are excited about and supportive of these technologies,” says Jordi Ortega of State Farm. “Reduction in the number of crashes will not occur overnight, however. We are seeking to learn more about the risks associated with these technologies.” When Consumers Digest asked him what these risks might be and how long it will take to evaluate them, Ortega replied that he wouldn’t share any more details.

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