In good times and bad, risk is in the eye of the insurer

Florida has not seen a hurricane in 10 years, and the state’s ranking for worst drivers has improved dramatically over the past five years. Why, then, are our homeowners and auto insurance rates among the highest if not the highest in the nation? It seems unfair, but no one said insurance rates were fair. Reasonable, maybe — but not fair.

The quick answer is that insurance companies use a number of factors to set their rates. So, while natural disasters and fatal motor vehicle accidents are critical information for us as homeowners and drivers, insurers may give other variables more weight.

For auto coverage, a closer look at the data included in the worst driver rankings may be useful. CarInsuranceComparison.com analyzed five categories of data collected by the National Highway Traffic Safety Administration to come up with the overall score. All 50 states and the District of Columbia were then put in rank order based on those scores. Florida ranked 32nd overall.

Drill down to the component scores, though, and the story gets a little more complex. First, the data reflects fatal crashes, not crashes with injuries or crashes with property damage only — and those are two things that insurance companies look at when setting premiums.

Second, Florida scored well in two of the five categories. We had fewer fatal crashes related to speed than any state or the District of Columbia. We ranked toward the bottom, too, for alcohol-related fatal accidents. Floridians are a little better than average when it comes to fatal crashes in the “failure to obey” category — that is, fatal crashes linked to the driver’s failure to obey traffic signals, the victim’s failure to wear a seat belt, or the driver did not have a valid driver’s license.

Where did we go wrong? We’ll explain in our next post.

Source: Palm Beach Post, “Wait, Florida drivers not Top 10 worst? We pay fourth-most to insure,” Charles Elmore, Dec. 1, 2015

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