If all of our neighbors would just drive even less, we'd get lower car insurance rates.

Will reduced driving mean lower car insurance rates?

We asked the nation's top auto insurers whether high gas prices and reduced driving are translating to lower rates yet. Here are their answers. State Farm spokesperson Dick Luedke notes that State Farm rates have been on the decline nationwide since 2004, but reduced accident claims are not yet leading directly to further rate reductions: "Our actuaries look at claims data not just to see the recent past, but also to see what might change the future, like gas prices." Luedke says there's no hard and fast rule as to what level of accident reduction would spark lower car insurance rates, but says, "If we saw a reduction as big as 10 percent in accident frequency, we would have reacted long before that." Allstate spokesperson Kate Hollcraft says, "We have just recently seen a decline in automobile claim frequency and if this continues through the summer months, we would probably be able to attribute it to a rise in fuel costs." Progressive spokesperson Leah Knapp says, "We don't speculate about future rate changes, but it would be accurate to say that we continuously review market and business conditions, including monitoring losses, so that we can ensure our policies are accurately priced everywhere we do business. When our analysis suggests our rates require adjustment, we may seek to either raise or lower rates accordingly." Nationwide Vice President & Policyholder, Standard Auto Product & Pricing, Larry Thursby, observes that "customers are having fewer accidents." But he notes it's been that way for a couple of years due to a variety of factors, like an aging population that becomes safer drivers, graduated licensing laws for teens and crackdowns in drunk driving. In addition, potential rate reductions due to accident frequency are being offset by inflation in the usual suspects: medical and hospital costs, repair costs and legal costs. Thursby says that Nationwide has been passing along cost savings by offering guaranteed renewability, lower surcharges and broader "forgiveness" for accidents, fender-benders and minor violations.

And that could be in the process of happening. When Americans spend less time on the road, the frequency of car accidents declines. And when car accidents go down, so do claims on car insurance. That gets the ball rolling: When auto insurers see their costs on claims declining steadily, they typically respond to market conditions by lowering their rates in a bid to stay competitive. And voila!, we write smaller checks for our car insurance premiums.

With run-away gas prices, Americans are already driving less. The Federal Highway Administration (FHWA) reported in May 2008 that Americans are driving at "historic lows." The estimated "vehicle miles traveled," or VMT, for March 2008 fell 4.3 percent compared to March 2007, making it the sharpest dip for any month since the FHWA began tracking traffic-volume trends in 1942. (Want to follow driving trends? The FHWA publishes monthly "Traffic Volume Trends.")

When accident claims go down, auto insurers can usually respond fairly quickly. To adjust premiums, they must file new rates with every state in which they operate. They can file new rates any time they want to respond to market conditions, and many states offer a "file and use" system, where auto insurers can file new rates and begin using them immediately without the state insurance department's prior approval. Some states even have a "use and file" system, so auto insurers can implement new rates and then officially file them shortly thereafter. This way auto insurers can begin passing on savings (or increases) right away.

The nation's largest auto insurers are the first to see trends in accidents and claims payments due to the sheer volume of their claims data. For example, State Farm, the nation's largest auto insurer, handles about 19 million auto claims a year (that's a little over 17 claims per minute, all day, every day).

Robert Passmore, Director of Personal Lines for Property Casualty Insurers Association of America (PCIAA), an industry trade group, says, "This is where you see competition kick in." He notes that if you live in a state that requires "prior approval," it would take a longer time to see rate reductions. That means Californians and New Yorkers could be tapping their toes waiting for rate reductions while everyone else pockets savings.

Auto insurers also note that car insurance rates have been holding steady or declining over the past few years anyway. For example, State Farm customers in all states have seen rate reductions between Jan. 1, 2004, and Dec. 31, 2007, and customers in 39 of those states saw double-digit percentage rate decreases. (State Farm policyholders in New Jersey got the biggest drop of 29.19 percent.)

Passmore cautions that other factors could offset the trend in reduced driving — specifically, medical costs from bodily injury claims, legal costs relating to claims disputes and repair costs that are, for now, rising faster than the rate at which accident claims are going down.

Darn those repair, medical and legal costs! If it weren't for those, drivers could already be seeing lower car insurance rates (as we sit at home). However, insurers generally agree that if we see significant accident reductions, lower rates won't be too far behind.

Perhaps at the $6-a-gallon mark?