Gas Prices Go Up But Car Insurance Goes Down?
I came across an interesting article from the Associated Press which stated that as the cost of gas went up, the price of car insurance should remain steady or decrease. Their argument goes as follows;
But good drivers may notice some relief in their car insurance rates, which have either remained steady or fallen in many states for a variety of reasons. If high gasoline prices prompt less driving, accidents and insurance rates could drop further.
The article offered no statistics to prove their argument. But logically speaking if the price of gasoline increases does it really mean that our car insurance premiums should level off and in fact become cheaper?
We do not have the statistics to back our argument up either, but if we think about it, the increase of gasoline prices should have no effect on the price of car insurance. Why? We do know that the less driving one does, the less accidents they can get into because they are lowering their probability of a collision by lowering their risk. However, gas prices not only effect the general public, but they also effect insurance companies as well. How?
Insurance companies like any financial company use tons of paper per day and what is used to make paper? Oil. Therefore, an increase in the oil price has a negative impact on the paper industry because it raises their prices, causing for their buyers, the insurance companies to pay more for paper.
Also consider that major insurance companies employ field claim adjusters, whom are given company vehicles and who are giving a gas card. Since adjusters have to drive places to investigate claims, they are going to use up gas on the company’s dime. The increase in gasoline will therefore increase the cost for the insurance company of doing business and they will certainly pass those costs on to the consumer.
Another more psychological reason why gas prices going up doesn’t mean your auto insurance will go down is because of the increased stress caused by the increase in gas prices. For the last few weeks, haven’t you noticed an increase in stress among drivers and the general public with regards to the increase at the pump? Actuaries have already proven that more accidents occur when one is under stress, even if the stress is underlying or secondary.
In conclusion, it is this opinion of this author that the increase in gasoline prices may not necessary reduce the costs of car insurance premiums for the above stated reasons. Although we do agree that if we are going to get a break on our bank account, we are probably more likely to get it from our insurance company than from at the gas pump.
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