SAN FRANCISCO, CA -- 08/07/08 --
Quality Planning, the company
that validates policyholder information for auto insurers, has released
proprietary findings that show Americans are changing their driving habits
as gas prices hit record levels this year. Based on telephone conversations
with drivers around the country, the firm concludes that a majority will
drive less in the coming year, with the biggest planned cutback occurring
in "pleasure use" (when a vehicle is not being used for commuting or
work-related purposes).
Based on this predicted reduction in discretionary use of vehicles, and
assuming gas prices remain at current levels, QPC projects a mileage
decrease of 4 to 5 percent over the next 12 months, or 500 miles per year
per vehicle. "With 250 million passenger cars on the road, this equates to
125 billion fewer miles driven. At an average 20 miles per gallon, this
will result in a reduction in gasoline consumption of 6 billion gallons,
equivalent to 307 million barrels of crude oil," said Dr. Raj Bhat,
president of Quality Planning. A barrel of crude oil yields approximately
19.5 gallons of gasoline.
While the report notes that Americans
have been slow to respond to fast-rising gas prices, it also reveals that
behavioral changes are accelerating as old habits are displaced by more
fuel-conscious actions. And automobile buying decisions are beginning to
reflect the pain consumers are feeling at the pump. Although some commuters
are reporting a shift to public transportation in areas that have
well-developed public transit systems, this shift has so far been
insignificant and has not yet affected total commute miles driven.
"Our conclusion is that, as for the first time in more than 20 years,
annual mileage driven on American roads is declining, and the rate of that
decline is accelerating. The many factors causing this decline make for a
very complex pattern," said Robert U'Ren, senior vice president at Quality
Planning. "As individuals and families adjust their lifestyles to the
impact of higher oil prices, fundamental change will occur. In no sector is
this truer than for auto insurance companies, which must focus
their pricing and products to address consumers' emerging switch to new
vehicle designs, shifts in household vehicle mix, driver usage patterns,
and also changes to underlying cost structures. The latter due to the fact
that the increased price of oil and other goods also affects the cost of
goods and services for which auto insurance pays."
Summary findings (complete report with accompanying charts can be
downloaded here)
1. Americans have responded slowly to rising gas prices
Despite gas price hikes of 35 to 50 percent, only one percent fewer
miles were driven in the past year. The rapid rise in prices at the
pump took many consumers by surprise. Initially, consumers reacted with
'quick fixes' that could be implemented without reducing mileage
driven. For example, despite recommendations of car manufacturers, some
owners of high-end cars switched from premium to regular gasoline.
Others tried to reduce average speed or inflate their tires to help
improve miles per gallon. Still others investigated public transit but
may have found that those fares had also recently increased.
2. Discretionary miles are going down, more so for rural drivers
By the end of the second quarter of 2008, 60 percent of drivers
reported driving fewer miles than a year earlier. A comparison of
projected mileage estimates obtained in the first and second quarters
of 2008 highlights a disparity in the mileage reduction between areas
that have well-developed transit systems and those areas with poor
public transit; people living in areas with fewer transit options are
cutting back more on their discretionary outings.
3. People with large SUVs are economizing the most
Drivers of large SUVs (e.g., GMC Yukon, Lincoln Navigator, Toyota Land
Cruiser) are more likely to be changing their driving habits. Quality
Planning found that in multi-vehicle households with a mix of vehicles,
owners of vehicles with larger engine sizes (SUVs, larger vans) plan to
reduce miles driven by 5.5 percent and shift some of the miles to more
fuel-efficient smaller cars, resulting in an expected increase in miles
driven on the smaller cars by about 2.8 percent.
4. Station wagons are emerging as a popular solution for hauling loads
The composition of insured vehicles during the first half of 2008 has
changed from a year earlier. But contrary to expectations, there was
virtually no reduction in the proportion of SUVs/minivans/vans/pickups,
which remained at 52.5 percent. The proportion of sedan/coupe category
dropped from 46.6 percent to 45.4 percent. The big change was in the
station wagon category, which increased from 0.9 to 2.1 percent.
5. Driving less will likely not lower insurance premiums
Drivers expecting to see lower insurance premiums because they are
driving less may be in for a surprise. The rapidly rising price of oil
has increased the cost of vehicle parts. Those higher costs will be
reflected in higher loss severity and, as a result, will act as a
counterforce to the reduction in annual mileage.
About Quality Planning
An ISO business, Quality Planning is focused exclusively on providing
rating integrity solutions to auto insurers. Quality Planning works with
insurance companies to identify areas of significant rating errors using
sophisticated database management, statistical analysis and modeling,
customized survey design, and highly targeted customer interaction. Quality
Planning helps clients work within their existing rating plans and charge
fair prices to policyholders based on a true representation of risk. The
company was founded in 1985 and is headquartered in San Francisco. For more
information, visit www.qualityplanning.com.
About ISO
A leading source of information about risk, ISO provides data, analytics,
and decision-support services to professionals in many fields, including
insurance, finance, real estate, health services, government, human
resources, and risk management. Using advanced technologies to collect,
analyze, develop, and deliver information, ISO helps customers evaluate and
manage risk. The company draws on vast expertise in actuarial science,
insurance coverages, fire protection, fraud prevention, catastrophe and
weather risk, predictive modeling, data management, economic forecasting,
social and technological trends, and many other fields. To meet the needs
of diverse clients, ISO employs an experienced staff of business and
technical specialists, analysts, and certified professionals. In the United
States and around the world, ISO helps customers protect people, property,
and financial assets. For more information, visit www.iso.com.
Contact:
Tim Cox
Zing Public Relations
650-369-7784
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