Chicago ? Melissa Senatore watched helplessly as the insurance premium for her family’s five vehicles – including a 2003 Jaguar and her teenage son’s 1999 Ford Mustang – climbed by a few thousand dollars in recent years.

But the 48-year-old Long Island homemaker got a nice surprise when she went in search of a better deal a few months ago: Senatore switched insurers, from a local company to Allstate Corp., and shaved her annual payment nearly 30 percent, from $14,000 to a bit more than $10,000.

“I was relieved. It just seemed like I was paying so much more money every year,” Senatore said.

She’s right. Between 2000 and 2004, drivers endured nearly 6 percent average increases a year for the cost of auto insurance – jacking the average policy from $687 to $857 annually per vehicle.

But this year insurance companies are throttling back on rate increases, and premiums are even declining for many drivers. A steady decline in car accidents and savvier risk-management techniques are allowing insurers to pass savings along to policyholders, while simmering competition has put pressure on prices.

“The market for auto insurance is becoming very competitive,” said Robert Hartwig, chief economist at the Insurance Information Institute. “Millions of consumers are likely to see a decrease this year.”

Many getting a break

Nationally, rates still are rising – albeit at their slowest rate in five years. Spending on auto insurance is expected to grow an average of 1.5 percent this year, to $870 per vehicle, according to the institute.

Melissa Senatore stands in the driveway of her home in Riverhead, N.Y., with four of the five vehicles her family owns. Senatore was paying more than 4,000 a year for auto insurance on the cars, but has gotten the bill down to near 0,000.

But many drivers are getting a break. In New York, 10 big auto insurers – including market leaders AllState, GEICO Corp. and State Farm Insurance Co. – have cut rates an average of 5 to 6 percent this year, saving New York drivers nearly $350 million.

State Farm, the nation’s largest auto insurance underwriter with about 19 percent market share, says it has dropped prices in 32 states this year while raising them in just one: North Dakota.

Topping out?

While the recent price reductions have left healthy margins, observers fear they could signal the market is topping out.

“The insurance cycle has been very strong the last several years. It’s just not going to last,” said Matt Nellans, an analyst at Morningstar. “I think we’re coming into a market where some companies will just slash prices to gain policyholders.”

Indeed, insurers lost billions during a four-year span in the late 1990s, when premiums were stagnant. By 2000, insurers were paying out $1.10 in claims and expenses for every $1 in premiums, in a misguided attempt to retain market share. They had been making up the difference in the booming stock market, but had to reverse course and aggressively raise rates after stocks tanked in 2000.

“Companies really need to maintain an underwriting discipline and generate income on the business they write. They know they can no longer make it up on the investment side,” said Richard Attanasio, analyst at insurance rating firm AM Best Co.

Indeed, analysts say auto insurers are in the driver’s seat this time around as they confront the first softening market in five years.

“We’re seeing a more prudent form of competition that is allowing insurers to lower premiums while remaining profitable,” Hartwig said.

Better pricing models

An important factor in that prudence is the growth of sophisticated pricing models. Insurers are spending millions on technology that allows them to crunch underwriting data to more accurately match price to a driver’s risk.

The result: They’re able to cut prices with a scalpel instead of a butcher’s knife, offering hundreds or even thousands of price points based on drivers’ potential risk, instead of lumping them into a few broad categories. For example, one policyholder might get a lower rate than another driver with an identical driving record, vehicle and age because he or she has a slightly better credit score – a factor increasingly used in determining premiums.

State Farm said last month it would move to such a tiered system in response to market share gains from competitors Allstate, Progressive Group of Insurance Cos. and others, which have been refining complex pricing models for years.

Fewer accidents

Another factor taming auto insurance rates: Fewer accidents, which the Insurance Information Institute credits to safer vehicles. The number of vehicle crashes resulting in injuries dropped 14 percent between 1996 and 2003 – from 2.2 million to 1.9 million – even though there are more cars on the road and the total number of miles driven is up.

The trend allows insurers to pay out a smaller percentage of each premium dollar in claims and expenses – now down to 93 cents – and insurers are passing along some of those savings to policyholders.