The study looked at basic liability coverage at major insurers, including Farmers, Progressive, Geico, Bloomington-based State Farm and Northbrook-based Allstate. Drivers in 12 major U.S. cities were examined as part of the study, including Chicago, Atlanta, Baltimore, Cleveland, Houston, Minneapolis and Oklahoma City.
The study found that on average, motorists save only $30 per year — or 1.6 percent of their insurance premiums, on average — for every 5,000 fewer miles driven each year. In Chicago, drivers receive less than 2 percent savings for lower annual mileage.
The only exception was in California, where state law requires insurers to give a driver’s annual mileage the second-most weight in determining premiums, according to the federation.
In California, motorists who drive 5,000 miles or less annually saved $81 a year on average, or 8.7 percent across the studied insurance providers. In Los Angeles, very-low mileage motorists who drive 2,500 miles or less annually saved $346 a year, or 30 percent compared with high-mileage motorists, the study said.
At Farmers and Progressive, motorists outside of California received no discount at all for driving 2,500 miles or less annually. In fact, they paid the same rate whether they drove 2,500 miles annually or 22,500 annually. “You can drive 2,500 fewer miles per year and pay the same premium for your liability coverage,” said Doug Heller, an insurance consultant at the federation.
However, locally based providers Allstate and State Farm provided some discounts for low-mileage drivers in Chicago.
At Allstate, the insurance premium for a motorist with an annual mileage of 2,500 is nearly 19 percent lower than what drivers with 7,500 annual miles are charged.
At State Farm, Chicago low-mileage drivers paid 10 percent less than those with an annual mileage of 12,500 or more. At Geico, low-mileage drivers paid, on average, 5 percent less than high-mileage drivers in Chicago.
When insurance companies diminish the impact of mileage in their pricing methods, lower-mileage drivers are punished by having to overpay for coverage, according to the study.
While Farmers and Progressive offered no discounts for low-mileage drivers, locally based Allstate and State Farm offered modest discounts across all markets of 2.9 percent and 3.2 percent respectively. Neither firm could immediately be reached for comment. Geico, also included in the study, showed an average 1.3 percent annual reduction for low-mileage drivers in the cities studied, according to the federation.
On a call with reporters, federation officials said the study is based on quotes received online by a fake standard applicant they created to test out insurance premiums in each test city: a single 30-year-old woman, who worked as a bank teller with a perfect driving record.
There are no figures on how a male applicant would have fared, federation officials said.
Facts such as credit scores and having a blue-collar job don’t send risk signals to insurers, Heller said.
But “people do get that how far you drive is a very fair (measure of risk),” according to Heller.
If you are a low-mileage driver, “It’s always a good idea to shop around, because there’s probably a better deal for you,” he said.
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