While decreasing fuel costs are saving Americans a lot of money, the flip side is that cheaper fuel is driving car insurance rates upwards. Auto insurance companies are increasing premiums to offset increasing accident claims.
It was predicted during early 2015 that almost $75 billion would be saved owing to fuel becoming cheaper. During the Labor Day weekend alone, over $1 billion was saved as fuel costs dipped by more than $1 per gallon as compared to the same period last year.
However, it seems that lower fuel costs also have a price to it. And it comes in the form of higher car insurance rates. Researchers have been able to prove that as gas prices decrease there is an increase in traffic fatalities. Driven by cheaper fuel, more cars are found on the roads, thereby increasing both traffic and congestion, which in turn leads to enhanced number of accidents.
Cheaper gas prices have recently been more of a trend rather than a blip and the long-term effects of decreased fuel prices seem to be playing out now. According to Associated Press, traffic fatalities increased 14% during the first half of 2015 and road deaths are predicted to cross 40,000; a first since 2007.
While the predicted increase in death fatalities by themselves present a morbid picture, the increased traffic is also leading to increased auto insurance rates and these rising costs are affecting all drivers, whether or not they were involved in accidents.
Wall Street Journal reported that the country’s top car insurers including Allstate and Geico are already increasing auto insurance rates. Allstate has received several state approvals to implement the increase in premium rates by an average of nearly 4%. Geico, a subsidiary of the Warren Buffet-owned Bershire Hathaway Inc., is also planning premium rate hikes to offset the increasing severity and frequency of customer claims.
While cheaper fuel is an important factor for increasing road accidents, there are other factors too. An improving economy is helping more drivers to get on to the road and rising road accidents are attributed to those drivers involved in texting or similar distracting activities while driving. And these distracted drivers are more to blame for increasing accidents, believes Warren Buffet. ‘If cars are better- and they clearly are- drivers must be worse (adjusted for mileage),’ he told WSJ in an email.