Allstate, Farmers Insurance to Raise Cost of Liability Coverage for SUVs, Pickups

Two of California’s biggest insurers said Monday they will boost liability premiums for sport-utility vehicles, vans and large pickups to reflect the big vehicles’ propensity to cause more damage in accidents.

Allstate, the state’s third-largest auto insurer, said it will increase liability premiums for many 2001 model SUVs and other large vehicles in California beginning Dec. 18. Los Angeles-based Farmers Insurance, California’s second-biggest insurer, said it plans to implement similar changes in the state late next year.

Owners of the larger vehicles could see premiums increase by $100 or more.

Drivers of smaller cars will benefit by paying less for liability coverage, which pays for damage and injuries caused to others in accidents, as the insurers fine-tune the way they charge for insurance.

The new pricing systems follow an announcement by State Farm, the No. 1 auto insurer in the U.S. and California, that it would charge certain SUVs and luxury vehicles less for medical coverage because bigger vehicles better protect occupants in crashes.

State Farm’s plan was immediately criticized by consumer advocates, who objected to the idea of giving a price break to vehicles that cause the most damage to other cars in crashes.

State Farm’s change is expected to amount to no more than a $50 increase in drivers’ premiums, and in many cases much less. In California, State Farm’s discount system typically would add or subtract no more than $5, said Brian Sullivan, an independent analyst and editor of Risk Information, which publishes an auto insurance newsletter.

But liability coverage accounts for about half the typical insurance premium, which means changes will have a bigger effect on what drivers pay. “Liability is a substantially more important coverage,” Sullivan said.

Allstate has already imposed its pricing change on drivers of 2000 model-year vehicles in several other states and will include 2001 model-year vehicles in 18 states, including California, by year’s end.

Farmers, meanwhile, has yet to decide whether it will include older-model vehicles when it rolls out its version of the pricing change in various states next year, said Kevin Kelso, who heads Farmers’ auto insurance unit.

Kelso said higher rates for SUVs, large pickup trucks and vans would be offset by lower rates for smaller vehicles, family sedans and luxury cars. Rates for sports cars would remain essentially unchanged.

Sport-utility vehicles accounted for about 19% of U.S. light-vehicle sales through the first 10 months of the year, according to the J.D. Power & Associates Sales Report.

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Components of Auto Insurance

Auto insurance typically consists of several different types of coverage:

Liability: Pays for injuries and property damage that the insured driver inflicts upon others. Usually comprises 40% to 50% of total premium.

Collision: Pays for damage to the insured driver’s car. Typically 30% to 40% of premium.

Comprehensive: Pays for theft of the insured driver’s car or damage not caused by an accident, such as weather or fire. Typically 10% to 20% of premium.

Medical payments: Known as personal injury coverage in some states, covers injuries to the insured driver and his or her passengers. Can comprise 10% to 20% of a typical premium, although drivers with other health insurance may choose to skip it.

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Source: Los Angeles Times