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High Gas Prices May Mean Fewer Auto Accidents


Posted on Jul 15, 2008

It’s simple, says The Wall Street Journal. Higher gasoline prices have resulted in fewer accidents and increased profits for auto insurers.

Initially, what has been an international “handcuffing” for U.S. motorists has its benefits. Parents worry less if their teenagers stay home, the car suffers less wear-and-tear and money is saved. Maybe bookstores and video rental retailers are profiting too, as more Americans become sedentary in this $4-plus a gallon gas age.

The U.S. Department of Transportation reported vehicle travel mileage dropped 4.3% in March. 2008, compared to March 2007. This March marks the first 12-month period where total number of miles driven dropped from the previous 12-month period since DOT began keeping records 25 years ago, the Journal reported.

Bob Hartwig, president of the Insurance Information Institute, said through the fourth quarter of 2007, he has seen no connection between rising gasoline prices and related driver habits. But Hartwig said $4/gallon for gasoline may force motorists to shun unnecessary trips.

But the correlation isn’t lost on Wall Street. Lehman Brothers analyst Jay Gelb, who raised earnings estimates on Progressive and Allstate on his expectation less driving means fewer accidents, which helps boost auto insurer earnings.

Progressive’s “TripSense” program promises that customers who “drive less, pay less” for auto insurance, a reward for safer driving habits. Spokeswoman Katherine Bell said “it’s difficult to ascribe one factor, such as higher gas prices,” to any one change such as frequency of accidents.

But Susan Murdy of the Fireman’s Fund Insurance Company was more specific, saying the connection between less driving and fewer accidents “intuitively” makes sense. Fireman’s Fund insures affluent and high net-worth individuals. Murdy said the company expects it “could see some decline in frequency (of accidents) in the second quarter.”

 

 

 

 

 

 

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