The average price of auto insurance has risen twice as fast in Philly as in the suburbs – Insurance News

May 12—Philadelphia car owners are used to paying more for insurance than suburban residents — a fact “anybody in the city of Philadelphia knows,” State Rep. Jordan Harris of West Philly pointed out last year at a Harrisburg hearing.

“The average Philadelphia driver needs to have answers: ‘Why is my car insurance so damn high?'” Harris told the state insurance commissioner.

The disparity has gotten worse recently. The average premium Philadelphia city residents pay has gone up twice as fast as the cost to suburban drivers over the past 10 years and far faster than for the state as a whole, an Inquirer review of data collected by Pennsylvania shows.

The state insurance department says premiums are complicated, and it can’t point to a single cause for the increase.

Philadelphia drivers paid insurers an average of $1,948 a year to keep their vehicles on the road in 2023, the latest year that data are available.

That’s 71% above the statewide average of $1,138 and 62% more than in the northern halves of Bucks and Montgomery Counties, where insurance is cheapest in the region, according to data collected from insurers for the Pennsylvania Insurance Department.

From 2014 to 2023, a time when U.S. consumer prices rose 31%, the average Philadelphia auto insurance premium zoomed 70%, while in the zones covering the suburbs increases ranged between 33% and 38%.

“Everybody’s car rates went up last year,” said Marie Fitzpatrick, a Philadelphia retiree who said she drives around 200 miles a month. Fitzpatrick paid an extra $288 for the year ending July 1 — 20% more — bringing her annual bill to $1,832, a little below the city average for all drivers.

“It feels like I’m paying more just to keep my car parked,” she said.

“People want to know why auto insurance rates are rising well above the level of inflation,” Harris, who heads the House Appropriations Committee and grills insurance and other state officials at annual budget hearings, said in an interview. “And why is it so expensive in Philadelphia? Folks in my city are penalized for just living in the city.”

Harris said State Rep. Greg Scott (D., Norristown) and others are working on legislation they hope could moderate annual increases.

What caused the price spike?

Insurance Department officials couldn’t say for sure why Philadelphia premiums rose faster than suburban or upstate rates.

“We can’t give you a simple explanation,” said spokesperson Adrian Sipes, pointing to a number of reasons that contribute to higher rates:

1.

Changing trends in the vehicles people drive, and accident frequency and severity, as well as the coverage and limits owners choose.

2.

Local conditions. “A certain area may generate more accident claims than before” due to traffic and construction issues, changes in commuter patterns, poor road conditions, new speed limits, “certain intersections becoming more dangerous, crime, etc.” The department has not tracked these specific costs for Philadelphia.

3.

Shifts in market share among the 200 Pennsylvania auto insurers. The four largest — State Farm, Erie Insurance Exchange, Allstate, and Progressive — account for more than half of driver premiums. Erie, the only one based in Pennsylvania, increased premiums more slowly than national companies in 2023, according to data collected by Standard & Poor’s. Shares of its publicly traded affiliate, Erie Indemnity Co., fell more than $40 in late April after the company acknowledged that despite charging catch-up premium increases in 2024, its claims costs have risen even faster, and more of its customers are looking to switch to other insurers.

Jonathan Greer, who heads the Pennsylvania Insurance Federation, an industry lobby, said that besides the likelihood of higher theft and accident rates in densely populated areas, Philadelphia is listed as a high-lawsuit jurisdiction by the Association of Trial Lawyers of America.

Studies have found differences between auto insurance rates, even in neighboring communities, can coincide with poverty rates, race, and other demographic characteristics.

A 2024 study by the District of Columbia insurance department found that Black drivers had more accidents and higher claims than white drivers but that these differences accounted for a small fraction of the 46% higher premiums Black drivers paid there.

Among reasons Black vehicle owners may pay more for insurance are that they are less likely to be homeowners who can qualify for multi-policy insurance discounts or pay premiums in advance at a discount, the study found. Also, owners who are able or opt to pay cash to cover accident damage avoid filing claims that drive their premiums higher.

The department concluded more study is needed to explain the gap.

How might auto theft affect rates?

Auto theft, long a significant cost to car insurers, fell sharply in the 1990s and 2000s as carmakers introduced digital keys and other anti-theft measures.

In Pennsylvania, 53,000 cars were stolen in 1995, falling to just under 11,000 in 2020, including around 5,000 in Philadelphia, according to data collected by the Pennsylvania Auto Theft Prevention Authority, a state-related agency controlled by a board of insurance and law enforcement officials.

But in 2020-2023, auto thefts surged, particularly in Philadelphia, peaking at around 23,000 thefts of 34,000 statewide in 2023. The authority’s data show sharp increases in carjacking, thefts of underprotected Kias and Hyundais, and a drop in criminal convictions for the crime.

The total number of thefts in Philadelphia fell last year to under 16,000 of 25,000 statewide after a surge in auto theft arrests in Philadelphia and other communities the authority tracked rose to a record 1,000 in 2023.

The authority attributes the Philadelphia car-theft drop to the breakup of organized theft rings. It also noted that catalytic converter thefts had dropped “to almost nothing” after a Bucks County-based ring that preyed on Philadelphia cars was broken up.

Yet that three-year surge in thefts doesn’t appear responsible for the biggest disparity between city and suburban rates. The largest increases in city premiums above suburban and state averages occurred earlier, in 2014-2018.

During 2020-23, city premium increases were closer to the state average. In 2023, the last year the insurance department surveyed, premiums rose an average 14% in West, South, and Center City Philadelphia; 15% in the Northeast and Northwest; and also 14%-15% in all four suburban regions.

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