Why is D.C. Auto Insurance So Expensive?

Statue of Abraham Lincoln and American flagResidents in the District of Columbia who suspect that they shell out more money for car insurance premiums than the average driver aren't crazy. D.C. has routinely been ranked among the most expensive places in the nation for coverage, with the National Association of Insurance Commissioners (NAIC) saying it has an average premium that is higher than all of the 50 states. In fact, the average premium for a policy with liability, comprehensive and collision coverage was 42 percent higher than the national average in 2008, according to the NAIC.

The problem with D.C. is it has many of the major characteristics that insurers recognize as indicators of high risk: 100 percent of District residents live in urban areas, vehicle theft rates are above average, levels of disposable income are high and residents drive more frequently than motorists in other states.

Urban Drivers Pay More for Auto Insurance

The entire area that makes up the District of Columbia happens to be classified as urban, according to the U.S. Census Bureau, and urban areas tend to have higher traffic volumes and higher crash rates and cost insurers more to cover.

The America's Best Driver's Report from Allstate quantifies just how much more likely drivers in urban areas are to file a claim. In the 2011 report, Washington, D.C., was shown to have the most accident-prone drivers in the country. Drivers filed a collision claim, on average, once every 4.8 years. The likelihood that a resident motorist would file a crash-related claim, according to the insurer's data, is twice that of the national average of once every 10 years.

A related factor that pushes up rates for comprehensive insurance-which covers theft-is the high frequency of vehicle thefts in the District. In 2009, for example, the theft-per-registered vehicle rate in D.C. was about 10 times higher than in nearby Delaware. Since cars are stolen so frequently, Washington D.C. auto insurance companies charge more to compensate for the higher risk.

High Income and Frequent Travel Have Indirect Price Effects

According to data compiled by the NAIC, the nation's capital has the highest disposable income per person and the highest number of miles driven per mile of roadway.

Lincoln MonumentHigh disposable income levels can have a domino effect on the price of coverage. Since motorists have more to spend, they may decide to purchase more expensive cars. More expensive cars are more costly to repair and replace. Higher repair costs mean more money spent per claim by insurers. More money spent per claim by insurers means more premiums they have to collect, which ends up costing the average consumer more.

The number of vehicle miles traveled is significant because motorists who drive more frequently tend to file claims at a higher rate. According to 2005 data from Progressive, drivers who put in 15,000 miles a year behind the wheel filed about 50 percent more property damage claims than motorists who drove 5,000 miles a year.