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MEMORANDUM July 19, 2013
To: Barry Stanton, Deputy Chief Administrative Officer for Public Safety
CC: Mark Magaw, Chief of Police, Henry Stawinski, Deputy Chief of Police
From: Alexander Krughoff, CountyStat Analyst
Subject: Auto Insurance Rate Difference for County Residents
Prince George’s County residents have long complained about paying higher auto insurance premiums than residents of surrounding jurisdictions as a result of the County having one of the highest rates of auto thefts in the region.
Unfortunately, auto insurance industry practices and data do not support this theory. Prince George’s County saw auto theft rates decline from a high in 2004 of 16,332 by 66 percent by 2010, according to FBI data. Similarly, in Montgomery County, auto theft rates dropped 61 percent from a decade high in 2002 of 3,722 to 1,455 in 2010. While not definitive due to sampling issues, insurance premiums appear to have decreased in both jurisdictions at the same rate between 2004 and 2010.
While auto insurance rates appear to have decreased at the same time auto theft rates dropped, it is unlikely they the driving reason. This is due in large part to the low weight of auto theft rates in the actuarial formulas used by insurers to calculate premiums. The top factors for determining insurance premiums are driver history, type of car driven, annual miles driven, and length of time with continuous coverage.
While data and industry practices do not support the theory of County residents paying higher rates due to higher auto theft rates than other Maryland jurisdictions, it is not possible to establish that County residents pay high rates across the board. Because each insurer uses their own actuarial formula based on its own insured population and other operation factors, rates vary significantly from company to company even within the same jurisdiction for the same driver.
When it comes to dealing with high auto insurance premiums, consumer advocates recommend shopping around. According to the data reviewed by CountyStat, this approach has the potential to reduce rates for some County residents. To help simplify this process, the Maryland Insurance
Administration (MIA) publishes a handbook on auto insurance twice a year. The publication lists rates for several common customer profiles with rates from numerous insurers, which consumers can use to help identify companies offering lower premiums. The MIA handbook can be downloaded for free here.
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Auto Theft Rates
Motor vehicle thefts are defined by the FBI as “the theft or attempted theft of a motor vehicle,” and specifically excludes motorboats, construction equipment, airplanes, and farming equipment. Every year, motor vehicle thefts are reported by law enforcement agencies to the FBI and published in the Uniform Crime Report. The most recent published motor vehicle theft data is for 2010.
CHART 1:UCR AUTO THEFT RATES 2000-2010
Source: FBI, Uniform Crime Reports, prepared by the National Archive of Criminal Justice Data According to UCR data, motor vehicle thefts in Maryland spiked in 2003, but have been steadily decreasing since. In 2010, total motor vehicle theft rates were just under half of the County’s high in 2003. Motor vehicle theft rates in Prince George’s County for the most part have followed the statewide trend, seeing theft rates drop from a high in 2004 of 16,332 to 5,597 in 2010. It should be noted that between 2000 and 2010, Prince George’s County accounted on average for 37 percent of the motor vehicle thefts Maryland, the highest average of any jurisdiction in the state. The County percentage of the state’s auto theft rate was at a high of 46 percent in 2004, but dropped to 31 percent in 2010. In Montgomery County, auto theft rates peaked in 2002 at 3,733, but declined to a low of 1,455 in 2010.
Auto Insurance Premium Data
The data used for this study was compiled by the MIA, which publishes a twice annual handbook on best practices for purchasing auto insurance in Maryland and rate comparisons among licensed brokers operating in the state.
CountyStat analyzed MIA auto insurance premium data for the years 2004 through 2010 for this memorandum. But due to changes in scenarios, zip codes and minimum liability limits it is difficult to make a mathematically sound comparison from year to year. It should be noted that when it comes to
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Baltimore City Montgomery County Prince Georges County Maryland
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calculating premiums, each insurance company calculates its rates based on its current customer base, market share and number of other factors, which is the reason rates can vary drastically between providers. Without access to the data and actuarial formulas used by each insurance provider it is not possible to identify the rate differences for County residents compared to drivers of surrounding jurisdictions.
CountyStat also reviewed data provided by the Center for the Study of Services, an independent,
nonprofit consumer organization that regularly collects auto insurance premium rates in Prince George’s County, Montgomery County and other surrounding jurisdictions. But similar to the problems
mentioned with the MIA data, subtle changes to the rate scenarios, driver history, zip codes and other collection criteria, making year-to-year comparisons is not mathematically practical.
Charts 2 through 4 are the result of analysis of rate data from MIA from 2004 through 2010. The data sets are from three different scenarios: A three-driver family; a single 30-year-old female; and a single 23-year old male driver. Montgomery County was only other jurisdiction of comparable size with data available for the selected time period.
CHART 2: FAMILY RATES
2004 2005 2006 2007 2008 2009 2010
Prince George's County Average $ 4,739 $ 4,100 $ 3,220 $ 3,997 $ 3,622 $ 3,508 $ 3,333 Montgomery County Average $ 4,254 $ 3,624 $ 3,005 $ 3,440 $ 3,163 $ 3,112 $ 3,020 State Average $ 4,396 $ 3,759 $ 3,475 $ 3,190 $ 2,956 $ 2,872 $ 2,695 PGC Average vs. State Average 7% 8% -8% 20% 18% 18% 19% PGC Average vs. MC Average 10% 12% 7% 14% 13% 11% 9% PGC Standard Deviation $ 2,414 $ 2,106 $ 1,516 $ 2,120 $ 1,883 $ 1,706 $ 1,609 PGC Maximum Value $ 10,637 $ 10,184 $ 9,588 $ 10,519 $ 8,951 $ 9,294 $ 7,126 PGC Minimum Value $ 1,361 $ 1,266 $ 1,248 $ 1,444 $ 1,646 $ 1,504 $ 963 MC Standard Deviation $ 2,214 $ 1,755 $ 1,537 $ 1,723 $ 1,573 $ 1,399 $ 1,376 MC Maximum Value $ 10,102 $ 10,102 $ 9,588 $ 9,386 $ 8,026 $ 7,925 $ 6,773 MC Minimum Value $ 1,415 $ 1,385 $ 1,088 $ 1,323 $ 1,425 $ 1,279 $ 1,275 Source: 2004 – 2010 Maryland Insurance Administration February Auto Insurance Comparison Guides
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CHART 3: FEMALE RATES
2004 2005 2006 2007 2008 2009 2010
Prince George's County Average $ 1,599 $ 1,624 $ 1,404 $ 2,858 $ 1,255 $ 1,311 $ 1,269 Montgomery County Average $ 1,446 $ 1,320 $ 1,197 $ 2,463 $ 1,085 $ 1,142 $ 1,122 State Average $ 1,483 $ 1,426 $ 1,247 $ 2,270 $ 1,031 $ 1,093 $ 1,057 PGC Average vs. State Average 7% 12% 11% 21% 18% 17% 17% PGC Average vs. MC Average 10% 19% 15% 14% 14% 13% 12% PGC Standard Deviation $ 623 $ 598 $ 591 $ 1,305 $ 600 $ 671 $ 563 PGC Maximum Value $ 3,154 $ 2,922 $ 2,908 $ 6,621 $ 3,241 $ 4,346 $ 3,037 PGC Minimum Value $ 636 $ 601 $ 533 $ 791 $ 584 $ 521 $ 477 MC Standard Deviation $ 542 $ 497 $ 432 $ 974 $ 480 $ 533 $ 439 MC Maximum Value $ 2,808 $ 2,808 $ 2,331 $ 5,779 $ 2,825 $ 3,796 $ 2,427 MC Minimum Value $ 613 $ 548 $ 591 $ 623 $ 489 $ 575 $ 612 Source: 2004 – 2010 Maryland Insurance Administration February Auto Insurance Comparison Guides
CHART 4: MALE RATES
2004 2005 2006 2007 2008 2009 2010
Prince George's County Average $ 4,485 $ 4,467 $ 3,074 $ 2,883 $ 2,579 $ 2,426 $ 2,441 Montgomery County Average $ 4,140 $ 4,022 $ 2,537 $ 2,473 $ 2,249 $ 2,155 $ 2,189 State Average $ 4,225 $ 4,113 $ 2,699 $ 2,279 $ 2,108 $ 2,026 $ 2,028 PGC Average vs. State Average 6% 8% 12% 21% 18% 16% 17% PGC Average vs. MC Average 8% 10% 17% 14% 13% 11% 10% PGC Standard Deviation $ 1,745 $ 1,724 $ 1,192 $ 1,309 $ 1,188 $ 1,035 $ 901 PGC Maximum Value $ 11,473 $ 11,459 $ 6,705 $ 6,621 $ 6,621 $ 6,720 $ 4,864 PGC Minimum Value $ 1,579 $ 1,669 $ 1,329 $ 791 $ 830 $ 967 $ 736 MC Standard Deviation $ 1,683 $ 1,617 $ 775 $ 983 $ 978 $ 846 $ 748 MC Maximum Value $ 10,880 $ 10,868 $ 4,585 $ 5,779 $ 5,779 $ 5,932 $ 3,862 MC Minimum Value $ 1,444 $ 1,333 $ 1,106 $ 623 $ 704 $ 825 $ 852 Source: 2004 – 2010 Maryland Insurance Administration February Auto Insurance Comparison Guides
While the charts present data for multiple years, year-to-year comparisons should not be made due to changes in the scenarios that impact rate quotes provided from the insurers. What can be extrapolated from the data in Charts 2-4 is the tremendous amount of variance between premiums for the same driver, no matter the jurisdiction. In some cases rates are cheaper for drivers in Prince George’s County than those in Montgomery County, which can be viewed when looking comparing the PGC Minimum Value and the MC Minimum Value.
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How Are Premiums Determined?
Auto insurance premiums are calculated by each insuring authority using an actuarial formula that ranks a number of different factors to arrive to a specific rate for the driver in question. Top indicators for determining premiums are: driver history, type of car insured, driver profile, how much a driver drives and length of time with continuous coverage, although there are other factors, their weight in the actuarial formula is much less.
A driver’s credit history can also be a heavily weighted factor in determining premiums. Insurers use data provided one of the three major credit reporting bureaus - Equifax, Experian, and TransUnion, and enter that data into their actuarial model to determine if a consumer is more likely to have claims. Again, these formulas vary from company to company and are different than those used by lenders to determine a consumer’s credit score. In Maryland, the insurers are prohibited by law from refusing to underwrite, cancel, refuse to renew, increase renewal premium or require a particular payment based on a consumer’s credit score.
