PCI Says No to Limitations on Territorial Rating for Conn. Auto Insurance

March 15, 2006

The Property Casualty Insurers Association of America (PCI) testified Tuesday before the Connecticut Insurance and Real Estate Committee that placing further limitations on territorial rating for auto insurance would reduce competition and unfairly increase rates for one group of consumers to subsidize another.

House Bill 5696 would place additional restrictions on territorial rating for private passenger auto insurance. However, the use of rating by geographical area or territory is reportedly a proven predictor of risk and an equitable and statistically supported method of distributing costs among policyholders.

“By limiting the use of territorial rating, this legislation would force some low risk policyholders to subsidize other policyholders that pose a higher risk of loss,” said Kristina Baldwin, PCI regional manager and counsel. “Loss results demonstrate that policyholders in various areas of Connecticut are not only more likely to incur a claim, but their claims are more expensive than other areas of the state and it is only fair that premiums for such policyholders should reflect such increased costs.”

According to PCI, the likelihood of being in an auto accident is significantly higher in areas with higher traffic concentration. Higher traffic concentration in an area, especially an urbanized one, implies greater exposure to other cars and, therefore, a stronger possibility of being in an accident. Motor vehicle density (the number of registered vehicles per square mile) varies greatly among different areas of Connecticut.

To highlight the differences among various areas in Connecticut, Baldwin pointed out that Union City has a traffic density of only 35 cars per square mile, while the motor vehicle density in Bridgeport is 4,471 cars per square mile. In addition, hospital room rates and other health care costs also vary widely in Connecticut.

Another factor which varies in different areas of Connecticut is motor vehicle theft rates, with people living in Hartford being almost seven times more prone to having their autos stolen than the state as a whole.

Other factors which impact loss results and which vary in different areas of the state including: body shop repair costs, uninsured motorist populations, and the number of injury claims reported whenever there is vehicle damage resulting from a crash.

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