Car insurance rates can vary month to month by up to 48%

It's well understood that the cost of car insurance varies depending on many factors, such as your driver's age, the type of car you drive and claims history. What may come as a surprise, however, is the cost of auto insurance also varies depending on the month you purchase a policy.

car insurance rate variability table A recent yearlong study, commissioned by insuranceQuotes.com, found that car insurance premiums in certain states varied significantly from month to month in 2013. This means that it's cheaper to buy auto insurance during some months, and more expensive during others.

For instance, the national median cost of a new full-coverage auto policy for a 35-year-old single male driver with a $500 deductible and a clean driving record was 8 percent cheaper in December than March.

What's more, some premium swings were dramatic in certain states. For instance, the median cost of a new auto policy in Hawaii is 48 percent cheaper in December than it is in March.

The study compared monthly premiums in all 50 states and the District of Columbia, and the results were as perplexing as they were intriguing to insurance analysts and experts.

"What's most interesting is that there's no discernible pattern to detect here," says Mike Barry, spokesman for the nonprofit Insurance Information Institute. "It appears as though the trend lines are all over the place, which doesn't really lend itself to a clear-cut reason or hypothesis for why that's the case."

Auto insurance rate variability by state

When it comes to month-by-month premium differences, not all states are created equal.

The following five states showed the greatest median price difference between the cheapest months and the most expensive: 

1. Hawaii — 47.9 percent difference between the cheapest month (December) and the most expensive (March).

2. Wyoming — 39.7 percent difference between the cheapest months (October through December) and the most expensive (August and September).

3. Washington, D.C. — 35.3 percent difference between the cheapest month (December) and the most expensive (March).

4. Maryland — 34.8 percent difference between the cheapest month (December) and the most expensive (April).

5. Pennsylvania — 34.5 percent difference between the cheapest month (December) and the most expensive (April).

The study results were both surprising and puzzling for Bob Hunter, former Texas Insurance Commissioner and current director of insurance at the D.C.-based Consumer Federation of America, a consumer advocacy organization.

Check out our auto rate variability tool to find out how rates are trending in your state.

"I certainly would have expected some variability, but I would have expected it to be within 10 percent or less," Hunter says. "When you get up into a 48 percent difference for Hawaii, or a 35 percent difference for D.C. … that's very surprising, and I'm not sure what to make of it."

According to a written statement provided by the National Association of Insurance Commissioners (NAIC), these state-by-state differences may exist for several reasons:

  • Risks and costs for insurers differ by state, as well as by various ZIP codes within those states. For instance, the risks faced by drivers and their insurers are very different in an urban state versus a less congested, rural state. The result is that insurance rates will fluctuate in ways that reflect each state's unique demographics and geography.
  • Bad weather, such as hurricanes or hail storms that may trigger a large number of claims.
  • A change in economic or business conditions that may require an adjustment to rates.
  • Changes to the law in a state. State insurance regulation is constantly evolving, which sometimes impacts how insurers can set rates. For instance, in 1988 California voters passed Proposition 103, a ballot measure that limited the factors insurance companies could use when determining auto rates, which included a ban on using credit scores.
  • Insurers don't change their rates at the same time, so prices may vary depending on the insurer's individual business model. According to the NAIC, if you see a large change over one month, it’s likely that a lot of insurance companies saw a particular trend in risk variables and so they asked the state insurance department for new rates all at the same time—thus creating a spike in premiums.

According to South Dakota Insurance Director Merle Scheiber, his state's low rate variability (2 percent) is a reflection of the competitiveness of South Dakota's insurance market.

"South Dakota has consistently had one of the most competitive and stable auto insurance markets in the country," Scheiber says. " This results in year-round affordable coverage."

Auto insurance rate variability by month

According to the study, December was the cheapest month to buy auto insurance -- not just nationally, but for the following 22 states: Arizona, Alaska, Colorado, Georgia, Hawaii, Idaho, Indiana, Maine, Maryland, Minnesota, Montana, New Hampshire, New Mexico, New York, Oklahoma, Pennsylvania, South Carolina, Texas, Vermont, Virginia, Wyoming and Washington, D.C.

Meanwhile, March took the lead for most expensive month, both nationally as well as for the following 16 states: Alabama, Arizona, Alaska, Delaware, Georgia, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, New Jersey, South Carolina, Washington, Washington, D.C., West Virginia and Wisconsin.

According to Eli Lehrer, president of the nonprofit research group The R Street Institute, the best way to determine any sort of trend is to look at premium variability by month.

"The data shows that it's cheaper to buy insurance in December in most states, and this is almost certainly because a lot of rate increases and new rating plans take effect in January, when the year -- as well as many companies' fiscal years -- begins," Lehrer says.

What's more, Lehrer says that some prices rise automatically with inflation under certain rating plans, and that this often happens in January. This is largely verified, he says, by the fact that states with the most lax rate regulation of auto insurance -- Vermont and Montana, for instance -- have their lowest rates in December.

Lehrer goes on to explain that in states with minimal rate regulation insurers can change their rates. In states with stricter rate regulation, insurers need to go through lengthy filing and approval processes to get rates changed.

So, in states with intense regulation, Lehrer says insurers will often try to get increases for the New Year. In states without intense regulation there's nothing particularly unique about January since rate changes can be made whenever the insurer wants. 

Barry points out that insurance companies all have a unique "ebb and flow" to the way they conduct business throughout the year, which may account for these monthly premium differences.

Why consumers should regularly shop for car insurance 

According to experts, the insuranceQuotes.com study emphasizes why it's so important for consumers to regularly shop for car insurance. Consider, for instance, that while December was the cheapest month nationally, it was also the most expensive in 11 states.

Barry suggests that consumers shop around during months that are cheapest in their given state. However, he cautions against using this study to justify going without insurance until a month when premiums are the lowest. Driving without insurance is dangerous and against the law in every state except New Hampshire.

“As usual, the answer is to shop around,” Barry says. “And the general rule of thumb is to get at least 3 different quotes to make sure you’re getting the best rate possible.”

Click here to view the press release for this study. 

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