# Auto Insurance Costs

Question

Read the article titled, “Auto Insurance Costs: Where Does Your State Rank?” located at http://www.cbsnews.com/8301-505145_162-40542496/auto-insurance-costs-where-does-your-state-rank/. Be prepared to discuss.

“Data Description” (Note: Please respond to one [1] of the following two [2] bulleted items)
From the e-Activity, the table shows Average Insurance Costs by State. Select two (2) states that are of interest to you. Next, speculate on three (3) possible reasons why the states you have chosen would have a difference in average insurance costs.
From the e-Activity, select ten (10) states and calculate the mean and standard deviation for average insurance costs.  Next, calculate the mean and standard deviation for average insurance costs for all 51 states. Compare and contrast the means and standard deviations for the ten (10) states you selected and all fifty one (51) states.

## Auto Insurance Costs

The state and the federal law state that all car owners should insure their vehicle accident related risks.  Insurance companies or government agencies largely focus on making an arrangement with the car owners to provide a guarantee of compensation for particular losses as defined in the customer policy bought by a client.  However, the client has an obligation of paying monthly premiums as calculated by the auto insurance companies (Kofman and Nini, 2012). However, traffic tickets, accidents, and even credit score highly determine a clients auto insurance rate. This study will attempt to identify the reasons for different average insurance costs in different states.

According to an article on Auto Insurance Costs: Where Does Your State Rank published back in 2015, different states have different average insurance costs owing to factors such as the state laws and the judicial system in a state.  According to this article, Michigan had the highest average insurance costs with an average rate of \$2,541 followed by Louisiana with an average of \$2,453 and Vermont had the least average cost of \$995 (Cbsnews.com, 2017).  One of the major causes of this variation is the presence of uninsured drivers in the states which are a violation of the state law.   According to the article, there is a direct correlation between the number of uninsured drivers and average costs.  For example, Michigan and Louisiana have 17 % and 12 % uninsured drivers respectively.  On the same note, the level of competition among auto insurance is another major factor that contributes to this variation.  The article goes on to state that Vermont has a high competition among auto insurance companies than both Michigan and Louisiana reducing this average cost (Cbsnews.com, 2017). Finally, the level and degree of protection provided by the state are a major contributor to this cost.  For example, Michigan guarantees unlimited personal injury protection, unlike other states

### References

Cbsnews.com. (2017). Auto Insurance Costs: Where Does Your State Rank?. [online] Available             at:http://www.cbsnews.com/news/auto-insurance-costs-where-does-your-state-rank/         [Accessed 24 Jul. 2017].

Kofman, P. and Nini, G. (2012). Do Insurance Companies Possess an Informational Monopoly?               Empirical Evidence From Auto Insurance. Journal of Risk and Insurance, 80(4),   pp.1001-1026.

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Data Representation