An 8% surge last year in the cost of auto insurance, plus growing economic woes, has led a fourfold increase in drivers letting their policies lapse, according to a Web site that tracks insurance price quotes.

"There's clearly a correlation between the sharp increase in car-insurance rates last year and consumers letting their insurance policies lapse - and unfortunately, rates went up just as the economy started to suffer," said Sam Belden, vice president of strategic alliances at Insurance.com., a price-shopping Web site operated by ComparisonMarket Inc. He said that nearly 40% of customers who contact Insurance.com's call center for a price quote have let their policy lapse, up from less than 10% a couple of years ago.

Last year, soaring gasoline prices forced many drivers to leave their cars in the garage more often, which cut the overall number of miles driven. But the rising number of drivers going without insurance - which is illegal in most states - indicates a high degree of desperation among economically pinched drivers. Consequences of driving without a license range from a fine in some states to being required to post a cash bond. Some states penalize uninsured drivers with penalty points on their license equivalent to being found guilty of a serious driving offense, such as driving under the influence of alcohol.

The survey has some limits to how comprehensive it is. Insurance.com offers price quotes from around a dozen member insurers, including third-largest insurer Progressive Corp. (PGR), but not the two largest insurers, State Farm Mutual Automobile Insurance Co. and Allstate Corp. (ALL).

Insurance.com measured a more drastic increase than the Consumer Price Index published last week by the U.S. Department of Labor. It noted a 2.5% increase in the cost of motor-vehicle insurance in 2008, which was less than the overall Consumer Price Index increase of 3.8% for the year.

Beldon said the difference comes from the way information is collected in the surveys. The Consumer Price Index comes from a wide-ranging survey of a variety of drivers, including many who aren't shopping for insurance, and includes many drivers who have held the same policy for years, which sometimes earns customers discounts. Insurance.com's survey is of customers who are actively shopping for a new price quote.

Belden said the two trends - drivers in a cash crunch and insurers raising prices - reinforce each other in a troubling spiral. "Increasing rates and the falling economy are clearly driving more consumers to let their policies lapse," he said. Once the consumers decide to reinstate their coverage, they are likely to get an unpleasant surprise in the form of an even bigger price hike.

Insurance.com's RateWatch found an annual increase of 8% in 2008 to an average annual cost of $1,954, the first yearly increase it recorded since 2003. Rates varied by state, with Washington D.C. posting the biggest jump at 10.5%, to an average $2,952. The average price in Utah rose 10.2%, to $1,861. The most-expensive state was New York, where the average price rose 7.6% in 2008, to $3,200. Rates fell in several states. The least-expensive state to insure a car in 2008 was Iowa, where the rate dropped 1.5% to $1,287 last year.

Belden said one factor pushing up prices is that after five years of generally soft prices, some insurers needed to increase prices to stay profitable.

But economic problems that have pushed some drivers into unemployment or even bankruptcy have taken a toll on credit scores, which also factor strongly into the rates insurers charge customers.

Insurers also penalize customers who let their policies lapse and drive without insurance for a few months, said Beldon.

He said that when people are forced to cut costs, many choose to let their insurance go, seeing it as a less "tangible" benefit than their cable bill, for example. He calls that a costly miscalculation that likely will boost their new insurance quote by 25% to 50% over the price they paid before.

"People assume they will let it lapse for a month or two, drive very carefully," and then reinstate the coverage when times get better, Belden said. "People don't realize the importance of it."

-By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141; lavonne.kuykendall@dowjones.com

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