In a perfect world, certain things would work in tandem, others
in reverse, and we'd know what to expect. When fuel prices rise,
people should drive less, right? And there would be fewer accidents
ought to go down, too.
Pump prices usually go up around Memorial Day and remain high
throughout much of the peak summer driving season. Even though the
year is young, prices nationwide are already spiking and it seems
we can expect $4 a gallon or higher once the sun really starts to
While there's no scientific evidence that the surge in gas
prices is affecting driving habits, AAA representatives are hearing
plenty of complaints and pleas for help. Their suggestions: Park
the Expedition and drive the Civic, string errands together to
drive less and use more mass transit.
"At current prices it's costing about $50 per month per car more
than it was a few months ago," says Lon Anderson, a spokesperson
for AAA Mid-Atlantic. "That's $100 a month for a two-car
Less mileage, better auto insurance rates
It would be nice if every policyholder suffering pump pain could
catch a break at the other end of this food chain − lower insurance
rates. Unfortunately, there are a lot of variables in this
First, gas and oil prices often move in random fashion. "We
don't try to predict," says Avery Ash, manager of regulatory
affairs for AAA. "The Egypt crisis made prices jump; Japan is
making them decline."
Second, there are many other factors that make people drive more
Driver miles hit a high point in 2005 and 2006 of about 3
trillion, according to the Federal Highway Administration, despite
a spike in gas prices after 2005's Hurricane Katrina. Then mileage
declined during the recession to close to 2.9 trillion and came
roaring back in 2010 to near pre-recession levels. A study by the
University of Michigan Transportation Research Institute showed a
more than 7 percent decline in distance driven between October 2007
and September 2008, when drivers faced both hard times and high gas
Making the needle move
But insurers don't react quickly to changes in driving habits
and instead base their rates on more concrete numbers.
"We lower rates because of claims experience," says Dick Luedke,
a spokesperson for State Farm. "If claims go down, so do rates."
But claims are unpredictable, too. If we stay off the road there
may be fewer accidents, but those accidents could be more severe.
And if the Japanese crisis continues, the increasing cost of
replacement parts may wipe out any insurance savings from fewer
"Most of the effects we're looking at here are just temporary,"
observes Steve Weisbart, chief economist for the Insurance
Information Institute. He notes that
rates, and auto insurers, are already very competitive, as
evidenced by the constant drumbeat of ads offering to save drivers
money. If gas prices level off, "people will go back to driving the
way they always do."
As far as insurers are concerned, "it will take a lot to make
the needle move," Weisbart predicts.
Maybe we could rally our politicians for help. In fall 2008, New
York Gov. David Paterson's insurance department issued a directive
requiring insurance companies to "consider the impact of higher gas
prices before setting insurance rates." As a result, Paterson said
in a press release that many of the state's insurers "voluntarily"
reduced or withdrew their requests for rate increases and what
would have been an average 8 percent hike fell to 1 percent.