According to the industry trade organization The Insurance Information Institute, auto insurance rates are going to drop in 2007 – the first decline since 1999. The typical U.S. driver will pay less for auto insurance in 2007 than in 2006, with the average premium expenditure expected to drop by 0.5 percent.

The average annual cost for auto insurance premiums nationwide for 2007 is estimated at $847 per policy, the first decrease since 1999. While the decline translates into hundreds of millions of dollars across the spectrum of all U.S. drivers, the average drop in rates will amount to $4, down from an average of $851 in 2006. The trend in the auto market certainly contrasts with the health insurance industry, where premium rates for employer-sponsored policies have risen 87 percent over the past six years (2000-2006), according to a survey by the Kaiser Family Foundation and the Health Research and Educational Trust.

The I.I.I. attributed the auto insurance price reductions to declining claim frequency (down anywhere from 3 to 5 percent in 2006 as compared to 2005), coupled with very modest increases in claims severity, with the average cost per claim, a figure that includes the price of medical care and property damage, rising only 2 to 4 percent in 2006 as compared to 2005.

“The I.I.I. is finding that the nation’s overall insurance rating system – how a company assesses the risk a particular driver represents – has on the whole become much fairer and more equitable through innovations in underwriting technology,” said an I.I.I spokesman. One of these “technological improvements” includes the consideration of an insurance applicant’s credit score as one of the benchmarks for auto insurance rates. This particular statistic put to use in insurance analysis has been controversial, and in fact was outlawed in California.