Will An Increase In Gas Price Impact Car Insurance Premiums?

Gas Prices' Effect on Car InsuranceWill an increase in gas prices impact car insurance premiums? During the ABC World News program, Diane Sawyer, and the rest of us watching, were shocked when the price per gallon of gas went up ten cents per gallon during the two minute interview. It immediately occurred to me that we would soon be seeing a reduction in car insurance premiums.

That’s right, when gas prices go up, car insurance premiums generally go down.

Auto insurance prices are based in large part on actuarially determined approximations of what the insurance company expects to pay out in claims. To make these calculations the insurance companies take the total amount of claims generated by a homogeneous (similar) group of insureds and divide by exposure units. In the case of auto insurance those exposure units are normally number of cars, but in a more precise measurement the exposure units become miles driven.

Over the road truckers laconically answer the question, “Where ya headed?” with “I’m driving to my next accident.” They know the more time you spend on the road, the greater your probability of having an accident. Even safe drivers will have accidents that are caused by elements beyond their control, such as inclement weather and other drivers.

When the price of gas goes up, people drive less. Insurance industry figures show that the price of gas has a direct causal relationship with miles driven . . . and contingently on the auto insurance premium you’ll pay.

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Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.

While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.

A college graduate with a firm grip on what he didn’t want to do; Clarence has managed electronic stores, restaurants, and security departments. In 1989, he joined his brother and established one of the first groups of independent insurance agent clusters. From that point on, Clarence has not done anything he considers work.

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