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WHY IS AUTO INSURANCE EXPENSIVE
There are many problems in providing auto insurance to everyone at an affordable price, where the roots of these problems are;
High cost of auto accidents: The National Highway Transportation Safety Administration (NHTSA) has an estimate of $230.6 billion a year cost to the society which results in about $820 per person. Further more, about 43,000 people died in auto accidents in 2005 where 39% of it was related to alcohol and 55% of those people were not wearing their seat belts.
Large number of auto accidents: About 6 million of auto accidents are reported to the police each year where young drivers take a disproportionate number of that number. Yet regardless of the driver's age substance abuse and speeding are more often involved.
Uninsured and underinsured drivers: About 5 to 30 percent of the auto drivers (depending on the state) have no auto insurance, even at the states where auto insurance is compulsory. When uninsured drivers cause auto accidents, they rarely pay for the property damage and bodily injury.
Another problem is the underinsured drivers where the minimum of liability insurance (about $25,000 for injured person) is quite often below to compensate an innocent victim for his injuries.
Some individuals having difficulty obtaining auto insurance: Overregulated insurance rates in some states made it difficult for insurance companies to collect adequate premiums, forcing them to either withdraw from the market or to limit the auto insurance applicants they accept. In many states, high risk drivers often have difficulty finding coverage in the standard insurance market. Because of this reason, states established residual market programs (known as assigned risk plans) where insurers provide auto insurance to the substandard applicants.
About 62% of auto insurance premiums went to pay claims in 2004 where high premiums are direct results of above (main) reasons.
