Why auto insurers charge Ramsey County drivers more than any other MN county

Feb. 1--Ramsey County drivers pay the most in Minnesota for auto insurance with the highest rates being charged in neighborhoods with less money and more crime.

That's the takeaway from a Pioneer Press analysis of auto insurance data compiled by the Zebra, a rate-comparison website that analyzed 73 million insurance rates filed with state regulators across the country.

Ramsey County residents pay $1,605 a year on average -- $310 more than the state as a whole. Minnesota's rates are the 14th-cheapest nationally, with Michigan paying the most and Maine the least.

Zebra spokeswoman Nicole Beck said rates are determined largely by where a driver lives, what and how they drive, and personal attributes such as age and credit history.

A middle-aged driver with a clean record and an older sedan will pay less than a teenager with speeding tickets and a sports car.

State rules also play a role. For instance, so-called "no fault" states like Minnesota and Michigan are more costly because insurers have to pay for their clients' injury-related claims, regardless of who caused the accident.

"There's many things in there you cannot control, but there are things you can," Beck said.

Drivers can also reduce their rates by buying home and auto insurance with the same company, avoiding lapses in coverage and paying the entire premium in advance instead of one month at a time, she said.

ZIP CODE MATTERS

Living in a neighborhood with a high crime rate will drive up premiums, Beck said.

In St. Paul, Payne-Phalen is the most expensive neighborhood for insuring a car. It also had nearly 2,200 reports of auto theft -- more than any other neighborhood in the city -- over a recent five-year stretch, police data show.

The 10 Minnesota ZIP codes with the highest average annual insurance rates are in St. Paul and Minneapolis. Eight of those areas have average household incomes below $50,000 a year, according to U.S. Census data.

These also are some of the state's most racially and ethnically diverse neighborhoods.

The cheapest insurance rates can be found in mostly rural ZIP codes in the southern part of the state.

Mark Kudla, of the Insurance Federation of Minnesota, said it largely comes down to risk. Rates are higher where there's a greater chance of an incident that will result in an insurance claim.

"If you live in an area with higher claim activity, you are going to pay more," he said.

Kudla criticized the Zebra's methodology. He said examining all plan and rate combinations filed with the state inflates costs because it includes expensive options picked by few consumers.

Beck said the firm's analysis accounts for that by giving greater weight to insurance plans that are more popular with drivers.

TAILORED RATES, DEMOGRAPHIC LIMITS

State and federal laws limit the factors insurers can use to set rates, according to the Minnesota Department of Commerce.

Insurers cannot consider a driver's race, ethnicity or income.

But home address, driving record and claim activity are fair game, as are credit history, age and occupation. Insurers also can use gender to set rates, although several states don't allow it.

Insurers also must demonstrate the rates they charge are related to their expected risk and losses. Minnesota allows insurers to "file and use" their rates without waiting for state approval, but they are routinely reviewed by regulators.

Kudla and Beck both said computerized data analysis has enabled insurers to customize rates like never before. They now consider thousands of variables instead of just a handful.

"Big data has definitely helped," Kudla said. "A lot of it is based on individual metrics."

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