Federal report: Allentown among places where auto insurance deemed unaffordable

Feb. 03--John Rosario has been selling car insurance on Seventh Street in Allentown for 20 years, but only in recent years have his customers been telling him that they're struggling to pay their insurance bills.

His clients are working men and women, usually in their 30s and 40s, who are trying to stay financially afloat, Rosario said. The lowest rate Rosario offers is $250 a year.

"We have a lot of clients who work paycheck to paycheck," he said. "It's a struggle sometimes. They come in and ask how they can pay their insurance."

Rosario's clients aren't alone. A new federal study found 18 million people can't afford car insurance, including 1.1 million people in Pennsylvania.

The report is the first affordability study done by the U.S. Treasury Department's Federal Insurance Office. It analyzed more than 32,000 ZIP codes in the country and identified about 9,000 where at least half the population was made up of minorities or low-income households.

Car insurance was deemed unaffordable in more than 800 ZIP codes, including 35 statewide. One of them -- 18101 -- covers center city Allentown, where Rosario's insurance company is located. In two others -- 18102, also center city, and 18109, which covers east Allentown and parts of Hanover Township, Lehigh County, insurance was deemed affordable, but just barely.

Of course the situation increases the risk other motorists who live and work in the area will come into contact with an uninsured vehicle.

Pennsylvania was one of six states with the greatest number of people living in ZIP codes where state-required auto insurance was found to be unaffordable. Most of the Pennsylvania neighborhoods identified were in Philadelphia. The states with high numbers were New York, Florida, New Jersey, Michigan and Texas.

The Treasury Department said it did the study because affordable auto insurance can promote financial security for individuals and families. It noted that low-income drivers are more likely to be uninsured.

The report did not list rates but noted that another study found a full-coverage auto insurance policy varied from a low of $808 per year in Maine to a high of $2,738 in Michigan.

The average U.S. household spends about 2 percent of its annual income on personal automobile insurance, according to the Treasury Department's report.

Alan Jennings, executive director of the Community Action Committee of the Lehigh Valley, said he hasn't heard personally from people struggling to pay car insurance, but the report doesn't surprise him.

"People don't have any money to pay bills," he said. "It's a constant challenge of what they pay and what amount. Poor people live in a constant crisis-survival mode."

But some think the study didn't give the full picture.

Ronald Ruman, press secretary for the Pennsylvania Insurance Department, said the state had some concerns with the report, including that it strictly looked at incomes.

He also said there are 220 companies selling auto insurance, so customers can shop around to get a competitive rate.

"We understand the issue and share concerns, but we think in Pennsylvania, auto insurance is a pretty affordable product," he said. "We simply would encourage people to shop. It's very possible there's a better deal out there."

John Yurconic of Yurconic Agency in Allentown said numerous factors determine the cost of auto insurance.

"If you have a 700-plus credit score, two cars, no accidents, violations or DUIs in the last three years, I would call insurance affordable," he said.

But in urban environments, like Allentown and Philadelphia, the rates are higher because the risks are different, Yurconic said. Cities tend to have more theft, on-street parking rather than private garages and congested roads.

"A lot of things will lead to a higher cost of insurance," Yurconic said.

Except for New Hampshire, all states require consumers to have car insurance. The Treasury Department hopes the report will be used by consumers and policymakers to assess the affordability of personal auto insurance.

Morning Call Database Editor Eugene Tauber, reporter Tom Shortell and the Pittsburgh Post-Gazette contributed to this story.

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