Monthly Archives: July 2022

Auto Insurance, Highway Safety

Pot Legalization Link To Car Crashes Variesby State, Study Finds

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Max Dorfman, Research Writer, Triple-I

Recreational marijuana use is associated with automobile crash trends, according to a paper published in the Journal of Studies on Alcohol and Drugs. However, the study also noted that retail marijuana sales aren’t solely responsible for the general rise in accidents.

Legalization of recreational marijuana use was correlated to a 6.5 percent growth in the rate of crashes involving injuries and a 2.3 percent rise in those involving fatalities. With legalization and retail sales, the study found that the total impact was a 5.8 percent rise in injury crash rates and a 4.1 percent increase in fatal crash rates.

But these results were inconsistent across states, with the effects on injury crash rates varying from a 7 percent decrease to an 18 percent rise and fatal crash rates ranging from a 4 percent increase to a 10 percent decline. Colorado experienced the biggest rise in injury crash rates after legalization and retail sales, coming in at 17.8 percent. Nevada experienced the largest decline in fatal crashes, at 9.8 percent.

“Legalization removes the stigma of marijuana use, while the onset of retail sales merely increases access,” said lead researcher Charles M. Farmer of the Insurance Institute for Highway Safety. “But access to marijuana isn’t difficult, even in places without retail sales. Users who previously avoided driving high may feel that it’s okay after legalization.”

Farmer added, “Studies looking for a direct causal link between marijuana use and crash risk have been inconclusive.” Unlike with alcohol, no objective measure yet exists for how impaired a marijuana user has become.

As Triple-I notes, most studies find that marijuana use results in impaired coordination, memory, associative learning, attention, cognitive flexibility, and reaction time. Although it is clear from this research that driving ability is diminished, the extent of impairment continues to be studied.

Younger drivers are at higher risk of traffic accidents than older drivers, with younger male drivers at high risk. Early evidence indicates that younger male drivers are most likely to drive under the influence of marijuana.

Another study, in the journal Drug and Alcohol Dependence, suggests chronic, heavy use of recreational marijuana impairs driving skills, even when the driver is not high, with those who started regularly using marijuana before 16 years old showing the worst results.

These results demonstrate that the effects of marijuana vary widely across demographic groups, making it all the more important for everyone to be cautious when using the drug.

Disaster Preparedness, Disaster Resilience, Homeowners Insurance

As Building Costs Grow, Consider Your Homeowners’ Coverage

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By Max Dorfman, Research Writer, Triple-I (07/14/2022)

Home construction and maintenance costs are on the rise, and homeowners should be factoring these trends into their insurance decisions – especially as risks related to weather and climate intensify.

Rising interest rates and persistent disruptions in the building-materials supply chain can affect repair and replacement costs for purposes of homeowners’ insurance. However, a recent American Property Casualty Insurance Association (APCIA) survey found that approximately two-thirds of insured homeowners could be without key additional coverages – including automatic inflation guard, extended replacement cost, and building code/ordinance coverage – that could more effectively protect their investment.

“Inflation, recent supply chain issues, and increased demand for skilled labor and construction materials following unprecedented natural disasters in the last two years have contributed to a significant increase in the costs to rebuild homes and businesses,” said Karen Collins, assistant vice president of personal lines at APCIA. “It is imperative that homeowners review and, if needed, update their insurance prior to hurricane season to keep pace with rising costs.”

Most homeowners’ policies today cover replacement cost for structural damage, but it’s wise to check your policy – especially if you have an older home. A replacement cost policy will pay for the repair or replacement of damaged property with materials of similar kind and quality.

The limits of your policy typically appear on the Declarations Page under Section I, Coverages, A. Dwelling. Your insurer will pay up to this amount to rebuild your home. If the limits of your homeowners’ policy haven’t changed since you bought your home, you may be underinsured – even if you haven’t made any upgrades.

Many insurance policies include an “inflation guard” clause that automatically adjusts the limit to reflect current construction costs in your area when policies are renewed. If your policy doesn’t include this clause, see if you can purchase it as an endorsement.

Adding to the threat and potential costs is the steady growth in natural catastrophe losses in recent decades. This year’s Atlantic hurricane season is expected to be “well above average,” and wildfires are starting earlier, inflicting greater losses, occurring in more states, and taking more time to suppress.

Triple-I offers tips on how to properly insure your home for a disaster— which is all the more important given current market conditions, and the escalating threat of catastrophe.

Auto Insurance, Legal Environment, Regulation

Delaware Legislature Adjourns Without Action on Banning Genderas Auto Insurance Factor

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Delaware’s state Legislature adjourned for the year without the House taking action on Senate Bill (SB) 231, which called for prohibiting the use of gender as a rating factor in personal automobile insurance policies.

The measure was based on research conducted with the Consumer Federation of America that contended many insured Delaware women are charged more than men, even when all other factors are the same. If signed into law, it would have required Delaware’s auto insurers to revisit how they price their personal automobile insurance policies for all drivers. Six states – California, Hawaii, Massachusetts, Michigan, North Carolina, and Pennsylvania – already have similar laws in place.

“The Delaware state Legislature and the Department of Insurance have the right and responsibility to govern and regulate how insurance companies conduct business within the State of Delaware,” Triple-I Chief Insurance Officer Dale Porfilio wrote in response to SB 231, which was approved by the Delaware Senate in April 2022. However, in his letter to Delaware Insurance Commissioner Trinidad Navarro, he raised several concerns with the underlying research, including:

Website Quotes vs. Issued Policies. While the Internet and electronic processing of quotes have dramatically improved the speed and accuracy of quotes, Porfilio wrote, “Many details can change for the portion of quotes which ultimately become issued policies, causing quotes to not be 100 percent accurate for issued premiums.”

Single Hypothetical Insured vs. Range of Actual Insureds. The report studied hypothetical 35-year-old drivers, then drew a conclusion about the full breadth of female and male drivers in the state of Delaware.

Aggregation across Zip Codes. Pricing methodologies are refined to very specific territorial definitions, which vary by insurer, and the report does not describe how the sample was aggregated across Zip Codes.

Porfilio explained that a consequence of enacting S.B. 231 would be a redistribution of who pays how much premium, with most of the premium increases paid by female policyholders (notably at younger ages), and a majority of the premium decreases received by male policyholders.

Critics of U.S. auto insurer pricing practices have expressed concerns that certain rating factors discriminate against certain groups. Triple-I has explained in multiple contexts how U.S. auto insurers use a wide variety of rating factors to accurately price policies.  These factors must conform to the laws and regulations of the state in which the auto insurance policies are sold,  and eliminating any one could force less-risky policyholders to overpay and allow those with greater risk to pay less than they should.

Learn more about auto insurance pricing

Triple-I: Rating-Factor Variety Drives Accuracy of Auto Insurance Pricing

Why Personal Auto Insurance Rates Are Likely to Keep Rising

IRC Releases State-by-State Auto Insurance Affordability Rankings