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Auto Insurance Cost Changes in Colorado

Over the last decade Colorado’s auto insurance premium costs have risen. Fortunately for policymakers, facts about these cost increases are readily available from some reputable sources, even if often ignored by those who debate this issue. The National Association of Insurance Commissioners (NAIC) gathers data from almost every property/casualty insurer and annually reports their findings. NAIC reports are usually about two years out of date; this year, for example, the NAIC is issuing reports with data from Colorado experience in 2000. More up-to-date data are available from the Insurance Services Office “Fast Track Monitoring System.” Fast Track receives reports from about 75% of the Colorado auto insurance market. This Fast Track information breaks the overall car insurance package into its respective parts, offering information on the five largest parts of a car insurance policy. With this explanation, here is a ten-year history of car insurance costs and cost drivers in Colorado:

Combined Average Premium (NAIC)
Personal Injury Protection
(Fast Track)
Bodily Injury
(Fast Track)
Vehicle Coverages
(Fast Track)















































 not available




 Dollar Increase










Note that the combined average premium increase and percent changes are figured on only a nine-year basis. “Vehicle coverages” includes property damage, comprehensive and collision costs. “Fast Track” data are calculated by adding up all claims paid for a kind of coverage and dividing the result by the number of annual policies sold – which offers a good indication of how much these coverages actually cost the insurance companies.


Policy Making Implications

  1. Bodily injury cost declines (this is the personal injury liability claim costs that pay for losses not covered by a person’s own PIP coverage) over the last ten years make additional savings dubious. The NAIC reports Colorado’s BI costs are lower than in all but four other states, for example, so Colorado is already a national leader in restraining these costs. It seems highly unlikely that change in this area would produce substantial savings to Colorado’s car insurance consumers.
  2. Personal Injury Protection (PIP) costs remained relatively stable until the last two years. Part of this pattern of cost stability stems from the fact that medical care cost inflation moderated during most of the 1990s and has recently increased. Since nationally three-quarters of PIP claim payments are for medical care (according to the Insurance Research Council), it stands to reason that medical cost inflation would substantially affect PIP costs and premiums. Policymakers must decide whether a two-year spike after several stable years merits quick action or taking a wait-and-see approach.
  3. Vehicle repair and replacement costs have led the cost increases. A portion of this cost increase has been driven by insurers recognizing that hail damage costs were not fully priced before a devastating hail season in the early 1990s. Years ago the General Assembly passed legislation aimed at repair cost issues regarding after-market parts and glass repair, but has never taken a comprehensive approach to this part of car insurance. Given the cost-restraining effect of managed car in car insurance, policymakers may want to consider a similar procedure for car repairs. Additionally, making hail coverage a separate option may produce some significant savings in comprehensive coverage costs

Chart: Different Parts of Car Insurance Grew Differently Over the Last Ten Years