Posted on 22 Jan 2009
The percentage of uninsured drivers may reach a record in 2010 as unemployment increases, an industry group said today, a trend that may further pressure carriers amid a drop in auto sales.
About one in six drivers, or 16.1 percent, may drive without insurance in 2010, based on unemployment rate projections, the Insurance Research Council said today. That compares with a rate of 13.8 percent in 2007. Drivers are more likely to skip coverage when they lose work, the council said.
The increase in uninsured motorists comes as General Motors Corp. predicts the industry’s U.S. annual sales rate may fall below 10 million vehicles this month, marking a 26-year low. Progressive Corp., the auto insurer competing with Warren Buffett’s Geico Corp. to be third-largest in the U.S., said today that premium revenue from individual customers declined by 1 percent in 2008.
“As more people become unemployed because of economic conditions, those people who are directly affected, unfortunately, face tough choices,” said David Corum, vice president at the council, in an interview. “Some choose to go without insurance.
The nation’s unemployment rate rose to 7.2 percent in December, after ending 2007 at 4.9 percent. The rate is expected to reach 8.1 in 2010, according to the median estimate of economists in a Bloomberg survey.
Most consumers looking to cut costs are likely to scale back on other purchases before abandoning insurance, said Paul Newsome, an analyst at Sandler O’Neill & Partners.
“It’s typically the law that you have to have auto insurance,” Newsome said. “If you are going uninsured and driving a car, you are breaking a law.”
New Mexico and Mississippi had the highest ratio of uninsured drivers in 2007, 29 percent and 28 percent, the council said. Massachusetts drivers were most likely to purchase coverage, with only 1 percent uninsured. New York ranked fourth best, with 5 percent uncovered.