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The most and least expensive states for car insurance, 2011

Michigan has the highest average car insurance rates in the nation, followed by Louisiana and Oklahoma, according to Insure.com's new national survey of car insurance premiums.

If you live in Vermont or South Carolina, you have access to the most affordable rates, saving $1,000 a year or more compared with drivers in the most expensive states.

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Insure.com’s study collected auto insurance rates from six large carriers for more than 2,400 vehicles, based on 10 ZIP codes per state. We then calculated averages nationally and for each state.

The reasons for high prices vary considerably among states, but one thing is for sure everywhere: Uninsured drivers are dinging the rest of us.

State

Average annual premium

Michigan

$2,541

Louisiana

$2,453

Oklahoma

$2,197

Montana

$2,190

Washington, D.C.

$2,146

California

$1,991

Mississippi

$1,896

New Mexico

$1,837

Arkansas

$1,836

Maryland

$1,807

North Dakota

$1,794

Connecticut

$1,786

Rhode Island

$1,747

Wyoming

$1,714

Hawaii

$1,707

South Dakota

$1,707

Georgia

$1,670

New Jersey

$1,663

West Virginia

$1,633

Kentucky

$1,629

New York

$1,627

Minnesota

$1,614

Washington

$1,584

Missouri

$1,563

National average

$1,561

Indiana

$1,518

Colorado

$1,508

Texas

$1,492

Delaware

$1,489

Florida

$1,476

Nebraska

$1,470

Pennsylvania

$1,468

Kansas

$1,461

Alaska

$1,454

New Hampshire

$1,334

Massachusetts

$1,328

Idaho

$1,325

Alabama

$1,306

Oregon

$1,306

Nevada

$1,300

Illinois

$1,290

Arizona

$1,280

Utah

$1,272

Virginia

$1,237

Iowa

$1,179

North Carolina

$1,154

Ohio

$1,152

Tennessee

$1,146

Wisconsin

$1,128

Maine

$1,126

South Carolina

$1,095

Vermont

$995

Source: Insure.com

The big picture

When a state has a large proportion of uninsured drivers, insurance companies aren’t able to spread their risk sufficiently. Uninsured drivers aren’t paying their share, yet they’re still crashing and causing damage, passing the buck to drivers who then make claims on their uninsured/underinsured coverage.

About one in four Oklahoma drivers (24 percent) was uninsured in 2007, the fourth-highest rate of uninsured motorists in the country, according to a 2009 study by the Insurance Research Council (IRC). Michigan had the ninth-highest rate of uninsured motorists, with 17 percent driving uninsured, according to the IRC, while Louisiana ranked 27th with 12 percent of drivers uninsured.

Despite laws requiring liability insurance in 49 of 50 states – New Hampshire is the exception -- the numbers of uninsured have likely grown along with the unemployment rate.

"It's more of an economic problem than anything else," says Marc Eagan, president-elect of the Independent Insurance Agents & Brokers of Louisiana, and president of Eagan Insurance Agency in Metairie and LaPlace, La. "They just can't afford the rates."

Michigan car insurance rates pounded by injury costs

The average annual car insurance premium in Michigan increased by $443 since last year's survey, enough for the state to rise from second place tor first place and knock down Louisiana to No. 2.

And the reason it holds that No.1 spot is this: Michigan is the only state that guarantees unlimited personal injury protection (PIP) payments to people injured in car accidents. Insurance carriers pay up to $480,000 of PIP benefits, and the Michigan Catastrophic Claims Association (a private, nonprofit organization created by state law) reimburses insurers for costs above that amount. Auto insurers also must pay for up to three years for lost wages and replacement services.

Car insurance premiums in Michigan include an annual assessment by the association to pay for medical care when people suffer catastrophic injuries. The assessment through July 30 this year is $143.09 per insured vehicle.  And that doesn't include what drivers have to pay for required PIP coverage.

"In some cases the cost of unlimited medical coverage will be 50 percent of the entire premium on a vehicle," says Jon Spalding, president-elect of the Michigan Professional Insurance Agents Association and president and CEO of Spalding Insurance Agency Inc. in East Lansing and Perry, Mich.

Spalding says Michigan's car insurance law also has some expensive quirks.

Motorcycles are not considered motor vehicles in Michigan, so motorcyclists aren’t required to purchase auto insurance -- only minimal liability coverage in case they injure someone or damage property. But as long as they buy the state-required liability amount, they can still collect unlimited medical benefits if they’re injured in an accident with a car. In that case, the car driver’s policy would pay out first.

"If a high-powered motorcycle ran into me from behind and went over my car, my insurance would provide unlimited medical benefits for the motorcyclist," says Spalding.

While motorcyclists represent about 2 percent of the assessments paid into the Michigan Catastrophic Claims Association, they account for 7.3 percent of claims.

Legal system drives up Louisiana car insurance rates

Louisiana's No. 2 position in Insure.com’s rankings does not surprise local agents.

"We've had high rates for a long time now," observes Brad Bourg, president of the Independent Insurance Agents & Brokers of Louisiana and president of Bourg Insurance Agency in Prairieville, Donaldsonville and Chauvin, La. "Car insurance premiums are a big part of a household budget. It's incredible what some of these rates are."

Eagan says the state's judicial system pumps up auto insurance quotes.

Lawsuits involving car accident claims for less than $50,000 are heard by elected judges versus juries, who, according to local perceptions, tend to "side with the little guy," Eagan says. Personal injury attorneys advertise heavily on TV, encouraging people who have been involved in car accidents to seek legal representation, which leads to more lawsuits and higher auto insurance rates.

But both Bourg and Eagan say insurance companies have recently stepped up competition -- a good sign for the market. They’re pushing hard for more auto business from agents and have been accepting more “risky” customers than in the past.

Oklahoma’s wild weather

Oklahoma is struggling not only with uninsured drivers but also with weather that leads to floods of insurance claims. Last year was one of the worst for storms, including a storm in May that dropped softball-sized hail on Oklahoma City.

"Cars didn't just look beaten up," says Denise Johnson, chairwoman of the Independent Insurance Agents of Oklahoma and an agent at ECI Agency Inc. in Piedmont, Okla. "They looked like someone had taken a sledgehammer to them. All the windows were broken out."

Vermont sensibilities freeze out high prices

John Handy, president of the Vermont Insurance Agents Association and principal of The Essex Agency Inc. in Essex Junction, Vt., says Vermont's rural sensibilities and lack of traffic congestion help keep rates low.

"Because Vermont is still not thought of as a particularly litigious state, we have a lot of auto insurance carriers vying for a fairly small piece of the pie," he says. "And despite our long hard winters, Vermont drivers are a seasoned lot. We tend to hunker down and stay off the roads."

All that hunkering down keeps crashes and claims low.

South Carolina car insurance rates get some sun

Car insurance prices haven’t always been affordable in South Carolina.

G. Frank Sheppard, president of the Independent Insurance Agents & Brokers of South Carolina, says today's low rates stem from a 15-year effort to make the insurance market more competitive.

Starting in 1996, the state changed its regulations to give car insurance companies more flexibility to base rates on driver risk and turn away customers. Before those changes were made, Sheppard says, "We had a lot of national players quit playing in South Carolina."

About the rankings: Insure.com's state rankings show the relative cost of auto insurance among states. Insure.com commissioned a survey from Quadrant Information Services. Average insurance rates were calculated for more than 2,000 vehicles for model year 2011. Rates are based on a 40-year-old single male driver who commutes 12 miles to work. The sample policy had limits of 100/300/50 ($100,000 for injury liability for one person, $300,000 for all injuries and $50,000 for property damage in an accident) and a $500 deductible on collision and comprehensive coverage. The policy included uninsured motorist coverage.

More from Barbara Marquand here

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