Auto thefts, crashes, credit scores drive the cost of car insurance in ABQ, New Mexico

May 3—Reports of bad driving in New Mexico and news of higher auto insurance rates isn't a coincidence — in fact, insurance premiums in the state increased 34% in a year.

Riskier driving behavior, such as speeding, distracted driving and impaired driving, increases injury and collision claims costs, said Bob Passmore, department vice president of personal lines at the American Property Casualty Insurance Association.

Insurance companies use a menu of factors to determine rates, and at times it seems that everything matters. There's age, marital status, neighborhood, gender, type of car and credit history.

Though New Mexico isn't the most expensive auto insurance state, it's not the cheapest either.

Professor Subramanian Iyer of the Anderson School of Management at the University of New Mexico said the latest figures from Market Watch place New Mexico in the middle among states.

He said the April figures "put New Mexico at No. 25 across all states, based on the average annual full coverage premium, and No. 27 based on average annual minimum liability premium."

And as far as premiums? "So according to Market Watch, for 2023 the New Mexico average was $1,943 for full coverage," Iyer said. "It was $1,449 in 2022, which represents a 34% rise and the 10th highest (among states)."

Albuquerque and Rio Rancho have the state's highest current average auto insurance rates, according to Insurify. Clovis and Farmington have the lowest.

"Traffic issues are totally having an effect," Iyer said. "Premiums have gone up because of these reasons — particularly because of auto thefts."

Iyer cited data for Albuquerque.

"According to the National Insurance Crime Bureau, our metropolitan statistical area ranks sixth worst in the nation," he said. That's taking into account car thefts and car crashes.

Insurance companies take into account the general safety of the area in which a driver resides with the automobile. Yahoo! Finance, in an online report, said insurers use your garaging address the same way they use your ZIP code. They look at the history of average claims in that ZIP code, Yahoo! said, along with population density, traffic patterns, accident rates, road conditions, crime, the number of uninsured motorists and the cost of living.

And they look at auto theft rates, which continue to skyrocket. In the U.S., more than 1 million vehicles were stolen in 2022, marking a 7% increase over 2021, according to the National Insurance Crime Bureau.

Albuquerque ranked sixth in the insurance industry's vehicle theft hot spot report for 2022, but has since dropped out of the 10 worst metropolitan areas for vehicle theft. However, New Mexico stood at No. 6 in 2023 for the rate of vehicle thefts, with 489.67 per 100,000 people.

A complex formula

There's also pressure on insurance companies. Passmore said insurance industry losses have been piling up. He cited, in an email, an AM Best report showing a $21.2 billion net underwriting loss for the U.S. property/casualty industry in 2023, which followed a $24.9 billion loss in 2022.

The upward creep of rates, the troublesome traffic and vehicular issues, community crime and insurance industry losses are all part of the complex formula affecting rates — a formula that includes broader economic issues like inflation and supply pressures.

"Auto insurance premiums have been on the rise for the simple reason that the cost of what goes into auto insurance has been rising," Passmore said. "Vehicles with advanced technology, like cameras and sensors, require more parts to be replaced, higher labor costs and additional operations for scanning and calibration of systems.

"This means that repair costs have risen to their largest year-over-year increase," he said. "These more complex and expensive repairs are also taking longer, and that shows up as higher rental vehicle costs."

Credit scores

Credit scores have become a controversial factor in determining rates. A report authored in 2023 by the Consumer Federation of America found that New Mexico drivers with excellent credit and a perfect driving record paid an average annual premium of $412, according to report co-author Michael DeLong.

"But drivers with fair credit and a perfect driving record paid on average $560," DeLong said in an email. "And New Mexico drivers with poor credit paid on average $733 ... a 78% increase in auto insurance premiums, just because of their credit score."

The CFA report found there were only five states in which drunk driving led to higher insurance penalties than poor credit. A comparison of New Mexico drivers showed that those who have a DWI on their record and excellent credit pay on average $1,859 while a good driver with poor credit pays $2,248 per year.

The evidence shows, the report said, that insurers value credit more than driving safety.

But Passmore of the American Property Casualty Insurance Association says credit information can help customers. He said it's been well-established through extensive research that credit history is a proven and accurate indicator of how likely a person is to file a future claim and the potential cost of that claim.

"The use of credit in insurance pricing helps insurers identify consumers who are less likely to file a claim and therefore benefit from a discount or other savings," Passmore said. "Using credit information in insurance pricing saves consumers anywhere from 30 to 59% on their car insurance."

Still, the authors of the CFA report recommend state policymakers prohibit insurers from using credit information in setting auto insurance rates, which a handful of states already have done.

Uninsured drivers

What is known is that too many New Mexico drivers eschew insurance and hit the road anyway, adding uninsured drivers to the list of factors that insurers consider , in addition to crime, accidents and claims.

Bankrate listed New Mexico as the fourth worst state for uninsured drivers, with 21.8% uninsured on the road. WalletHub says 22% of drivers on New Mexico roads don't have insurance, meaning there is roughly a 1 in 5 chance the other driver won't have coverage if an accident occurs.

The link between poor credit and lack of insurance because of not being able to afford it is a circular, Catch-22 scenario that could trap some consumers. But a direct link is only speculative at this point.

"I'm not sure if there's a direct connection," said DeLong. "I know that people who have poor credit are paying a lot more for auto insurance and that's a significant burden, so it is possible or likely that many people with poor credit can't afford insurance so are driving uninsured ... and that's dangerous because it puts them at risk, puts others at risk and it indirectly drives up insurance costs for everyone. I think that's a likely thing that's happening."

Whatever the reasons for the number of uninsured drivers, it has led to New Mexico insurance agents emphasizing the importance of having uninsured/underinsured coverage, which is optional but would also add to the premiums for motorists seeking coverage. WalletHub puts that figure at under $100 per year.

Consider the entire cost

New Mexico's Legislature and Office of Superintendent of Insurance have oversight over insurance practices in the state, with the Superintendent of Insurance's office tasked with resolving consumer complaints. The state Legislature has given the OSI authority to review all rates to ensure they meet statutory requirements, Deputy Superintendent Colin Baillio said in an email. Among the requirements is that rates "cannot be excessive, inadequate or unfairly discriminatory."

He confirmed the effects of crime on auto insurance rates.

"Auto theft does have an impact on premiums for comprehensive coverage," Baillio said. "Some companies will increase premiums based on heightened incidents of auto theft or vandalism in certain ZIP codes or other geographic areas."

Local State Farm agent Jesse Dompreh said he hears complaints from those seeking coverage about the cost.

"It happens often," he said. "Insurance premiums have a tendency to change every six months, so people complain and that causes people to go shopping."

Dompreh, whose office is at Eubank and Juan Tabo, said he advises people to consider all the costs in car ownership.

"If you're in the market to purchase a vehicle, you have to consider all the charges and fees," he said. "So for some people that premium may cause them to delay the purchase of a vehicle or to get a different vehicle ... or not get a vehicle at all, because the car payment is not the only cost in purchasing a vehicle."

He said agents can help consumers learn their options.

"We don't make the rates. Agents do not make the rates," Dompreh said. "I do what I can to help. I explain to people what coverages they're getting and give them options so they can make an informed decision when they're purchasing insurance."