Smaller car, bigger insurance bill?

By Insure.com

Americans are looking to smaller cars for savings on spiraling gas prices and for lower emissions, but auto insurance savings may not follow.

Sales of light trucks dropped 23.6% from May 2007 to May 2008, according to Autodata. GM saw a 37% drop in truck and SUV sales during that period.

Even the vehicles that have long reigned as top sellers -- Ford F-Series pickups -- took a 31% hit in sales. The smaller Toyota Corolla and Camry and the Honda Civic and Accord filled in the sales gap; each outsold the F-Series.

Motorists who switch can gain substantial fuel savings. For example, switching from a Ford F-150 full-wheel-drive pickup to a Civic will save about $2,000 a year in gas. (For side-by-side comparisons of other vehicles' fuel economy, click here.)

But does a smaller vehicle equate to smaller car insurance rates? The answer, surprisingly, is usually no.

According to Insure.com's research on auto insurance rates, switching from a larger vehicle to a small car such as a Civic or a Prius is likely to raise your insurance premium:

2009 model vehicle	Average 6-month premium
Honda Civic	$835.11
Toyota Prius	$691.13
Toyota Camry	$651.07
Toyota Sienna	$632.97
Honda CR-V	$629.20
Ford F-Series	$597.13

Based on premiums for a male driver, age 40, who drives 12 miles to work and has liability insurance coverage of $100,000 for bodily injury per person, $300,000 for bodily injury per accident and $50,000 for property damage.

Insure.com surveyed rates for four of the nation's largest auto insurers in multiple ZIP codes across the U.S. for the 2009 Prius and Civic against the top-selling larger cars: the Toyota Camry (a sedan), the Honda CR-V (an SUV), the Toyota Sienna (a minivan) and the Ford F-150 (a pickup). The results: The Prius and Civic are the most expensive to insure among the group.

What are insurers thinking?

What's going on here? Do car insurers have no appreciation for fuel conservation, lower emissions and smaller carbon footprints? The answer for insurers is: only when it's justified by their claims experience.

"Small cars tend to increase insurance costs because they get into more crashes," says Russ Rader, a spokesman for the Insurance Institute for Highway Safety. "There's a myth that a smaller car is more nimble and helps you avoid crashes, but smaller cars tend to have more collision losses."

Of course, it's not the cars causing the accidents -- it's the people behind the wheel.

"Part of the reason is the driver," Rader says. "Smaller cars tend to be less expensive and driven by younger, higher-risk drivers. And they think they can zip around in traffic."

When auto insurers see more-frequent and more-expensive claims attached to certain vehicles, they rate policies for those vehicles accordingly. Thus if you buy a smaller car that has a history of high insurance losses, you're essentially paying for the blunders of other drivers of that vehicle model.

Insurance losses tracked by the Highway Loss Data Institute, a division of the insurance institute, give some insight into where these smaller vehicles are resulting in bigger insurance losses. The most recent data come from 2004 to 2006 models. The highway institute says:

• The Civic is "worse than average" for personal-injury losses and medical payments. That means passenger injuries are costly for this car.

• The Civic Coupe fares even worse. It is "worse than average" for bodily injury and "substantially worse than average" for collision, personal-injury protection and medical-payment losses.

• The Honda CR-V, classified as a small SUV, performs at "average" for all loss categories except comprehensive losses, where it is "substantially better than average." Comprehensive coverage includes payments for theft, fire, vandalism and natural disasters.

• The Toyota Sienna is "better than average" or "substantially better than average" across all loss categories, meaning insurers pay less in claims for Sienna drivers. (Very large station wagons and minivans, such as the Sienna, Honda Odyssey and Chrysler Town & Country, show no worse-than-average losses.)

• Ford F-150 pickups perform "substantially better than average" for personal-injury protection and medical-payment claims. Their only "worse than average" category is comprehensive claims, probably because the F-150 ranks No. 4 on the "most stolen vehicles" list compiled by the National Insurance Crime Bureau.

So though your big F-150 may catch the eye of car thieves, your passengers are safer from injury in an accident.(You can get an idea of how all 2008 models compare using MSN Money's Auto Insurance Risk Tool.)

Little cars with smaller bills

The Mini Cooper, Volkswagen New Beetle and Volkswagen Golf are small cars that stay at "average" or better for all loss categories, according to the highway institute. Here, though, lower insurance losses may not be due to the car design but the fact that they tend to be driven by more-experienced drivers.

"There's a big safety downside to moving to a smaller car because you're putting yourself at more risk of injury," Rader says. "It all boils down to the laws of physics: People think about safety features like air bags, but no matter how many air bags you stuff into a smaller car, it's not going to be as safe as a larger, heavier vehicle."

Of course, whatever vehicle you drive, the vehicle model is only one of many factors that go into the price of your policy. Your own driving record, claims history and location significantly affect your premium.

Published July 10, 2008