Auto Insurance Costs Drop in September

Automobile insurance costs declined 0.2% in September compared with a year earlier, according to Labor Department statistics, as insurers cut premiums in response to dwindling numbers of claims.

The decline followed a 0.5% year-over-year increase in August and a 3.2% gain last year, said the industry-sponsored Insurance Information Institute, summarizing the monthly report on consumer prices.

“Claim frequency is down, and the cost of claims is not up much,” said Ira Zuckerman, an analyst at Nutmeg Securities Ltd. in Westport, Conn. “Insurers are redistributing back to policyholders some of the excess profits they’re making.”

Fewer automobile insurance claims mean bigger profits for some insurers. Progressive Corp., the fifth-largest U.S. auto insurer, said third-quarter earnings rose 51% to $1.80 a diluted share, beating the expected $1.36--the average estimate of 18 analysts surveyed by First Call Corp.

State Farm Mutual Automobile Insurance Co., the largest U.S. car insurer, has led a move to cut premiums in some states but has been slower to trim rates in California, where it writes about 22% of the state’s policies.

Aggressive price cutting by smaller insurers, including the Automobile Club of Southern California and Progressive, helped lower California insurance costs by more than 5% earlier this year, according to the California Department of Insurance.

Insurers are also benefiting from efforts to stop organized fraud.

Allstate Corp., the second-largest U.S. auto insurer, on Wednesday said it had filed lawsuits seeking about $35 million from fraud perpetrators in Illinois and California, adding to a host of such suits it has already filed.

At the same time, costs of the services covered by auto insurance rose at a faster rate in the 12 months ended Sept. 30, the Labor Department report said. Body work prices jumped 3.4%, up from a 3.1% pace in the 12 months ended in August.