Smaller cars, bigger insurance rates

Downsizing is a natural reaction for seniors as they budget more carefully in times of recession such as this.  Switching to a smaller car seems an obvious choice, particularly with the higher gas prices we are all becoming accustomed to.  However as CNN points out, smaller cars are not smaller in every respect.  Smaller cars can mean higher insurance rates.

This is hardly news but it bears repeating.  Last year the the Wall Street Journal pointed out that Higher Insurance Costs Erode Fuel Savings on Small Cars.

MSN Money had the same message and showed the following data.

The insurance rates for smaller cars are higher because in a collision you will be closer to the point of impact.  Nowadays they also tend to be used for longer journeys to work, often in more dangerous urban locations.

It would have been great if the initiative of Norwich Union had worked out:

Their ‘Pay-As-You-Go’ insurance initiative was reliant on GPS systems installed in drivers cars. Monthly, their driving would be assessed based on the time of day the car was used and the mileage and a bill sent according to their results. So, if a motorist did fewer miles at off peak travel times, they would be less likely to have an accident, therefore lower risk and should pay less for their car insurance.
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They saw a 30 per cent fall in accident rates as people thought about their car use. They hoped that the car manufacturers would start offering the GPS boxes as standard but this did not occur.

Perhaps with time this idea will see the light of day again.

Certainly given the crushing weight of some automobile insurance rates, any way of reducing these will be greeted warmly by those drivers who are affected.

Footnote: If you are interested in books on Insurance, then why not visit the Insurance section of the Money Bookstore.