Sad Truth About Auto Insurance Prices in Kentucky

Probably two months ago, I went to a Gieco insurance company's local office in Cincinnati with my friend, Mr Ram, to buy a policy for him. And, we felt so good about the visit because not only Geico’s sale persons were polite and kind, but also they offered my friend a policy with an affordable price. In fact, the price was much lower than what expected that we looked at each other in disbelief. We thought it was cheap because it was much cheaper than mine. I and Ram were pretty much in the same age group and had basically similar driving records. So, as we happily turned our heads towards the exit door, I asked the director of the office, Mr Joe, why mine was so expensive and my friend’s was so cheap. “Because you live in Kentucky,” was his reply. Although I knew that car insurance rates vary from state to state, I’d never realized that the difference can be that huge. Because of the difference was so big that I decided to do some research on it. And, I posted it on my blog because I think every Kentuckian should know about it and take proactive actions to fix it.

No man may pack his belongings and move to another state just because of the state he lives in has a very high car insurance rate compared to other states. However, it may be detrimental on how he’s improving financially because it’s something that hit his wallet every month. According to www.kiplinger.com, Kentucky is ranked the seventh highest states for car insurance in the United States. However, when income per capita is put into consideration, it’s ranked the third highest states in the nation after Michigan and Louisiana. Due to its low median incomes, Kentuckians spend about 4.5% percent of their annual incomes on car insurance while Massachusetts dwellers spend just 1.4% percent of their annual incomes. Many financial experts state that in order for a person to have a brighter financial future than today, he must not spend more than 15% of his total incomes for transportation. Since a Kentuckian spend about 4.5% of his total incomes for car insurance alone, chances are good that his total transportation expenditure will exceed 15% threshold.

To make the picture clearer, let me compare Kentucky with its closest neighbor state, Ohio. I live in Kentucky and currently pay $108.59 per month for my modest auto policy. Although there’re other factors such as my age and driving experience contribute to my insurance price being this high, the biggest contributor is being a resident of Kentucky. It’s not a joke! I took a quote from www.geico.com and I will be paying just $73.58 per month for the same coverage if I live in Cincinnati, Ohio. In other word, for the same coverage of mine, my Ohioan counterpart pays $420.12 less per year for just being residing in Ohio. If we both live as long as average Americans (US life expectancy is 78.64 years), I will pay $25476.08 more than my Ohioan counterpart for the same auto policy. According to US census of 2012, per capita money income of Kentuckian was $23210. Therefore, it’s safe to say that a typical Kentuckian spends more than his one year income for car insurance in his life time. It’s just ridiculous!

So, What went wrong with the state of Kentucky? Why are Kentuckians have to pay much more money than their counterparts for car insurance premiums, even though most of us don’t even live in metropolitan cities? Of course, there are many factors that make Kentucky being one of the highest states for car insurance in the US. However, there are three main factors that, I believe, contribute most to this issue. First, it has an awful high number of uninsured and underinsured drivers. According to www.WKYT.com , there’s 20% chance that you will be hit by uninsured drivers in Kentucky. Second, it has severe weather. Kentucky used to be one of the highest list in wind and hail related claims. Thirdly, there are many fraudulent claims because a lot of drivers manipulate the State's "No-Fault" auto insurance laws.( Kentucky is one of the twelve states that used “no-fault" auto insurance system).

Is there anything that we can do to solve this problem? Of course, we can do something to decrease the numbers of uninsured and underinsured drivers in the state. The State laws should make it mandatory for insurance companies to report to state agency not only when they sell a new policy, but also when they renew and cancel an old one. The current state laws require that insurance companies report to DMV departments only when they sell a new policy. When insurance companies renew or cancel a policy, they're not required by laws to send a specific notice to state government. Instead, they just have to update their database which they shared with the government agencies and the Kentucky Transportation Cabinet is responsible for monitoring it. And, no one actually knows how well KYTC monitors that large dababase. It's no wonder that Kentucy has 16% uninsured drivers while the national uninsured drivers average is 13.8%. If it’s a requirement for insurance companies to report to DMV when they renew or cancel a policy, it will be much easier for law enforcers to identify and punish those who drive without insurance. As a result, more people will buy car insurance and that will lower insurance rates for every Kentuckian. And, we can press our politicians to change the laws. What it takes to engage in this proactive action is just sending mail or e-mail or making a call to our state's congressman/woman. Furthermore, we can also share our awareness about what makes car insurance in Kentucky so expensive and how can we bring it down. That includes urging our friends, neighbors, family members and community members to buy car insurance policy. Historically, states where car insurance rates are the lowest have the lowest uninsured driver numbers too.

Collectively, we can bring down car insurance prices in Kentucky by taking proactive actions to lower the uninsured drivers numbers. And, we all can easily play our part.