Category Archives: Auto Insurance

Auto Insurance, Health & Safety, Highway Safety, Legal Environment

Studies: Car Crashes Rise as Recreational Cannabis Becomes Legal in States

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Connecticut this week became the latest state to legalize recreational use of marijuana, and more are expected to follow.

The increased marijuana use that accompanies legalization has raised concerns about road safety.

Researchers at Insurance Institute for Highway Safety (IIHS) and the Highway Loss Data Institute (HLDI) since 2014 have been examining how legalization has affected crash rates and insurance claims, and evidence is emerging that crash rates go up when states legalize recreational use and retail sales of marijuana.

The most recent of these studies, released on June 17 by the IIHS, shows that injury and fatal crash rates in California, Colorado, Nevada, Oregon, and Washington jumped in the months following relaxation of marijuana laws in each state. The five states experienced a 6 percent increase in injury crash rates and a 4 percent increase in fatal crash rates, compared with other Western states where recreational marijuana use was illegal during the study period.

Only the increase in injury crash rates was statistically significant.

“Our latest research makes it clear that legalizing marijuana for recreational use does increase overall crash rates,” says IIHS-HLDI President David Harkey. “That’s obviously something policymakers and safety professionals will need to address as more states move to liberalize their laws — even if the way marijuana affects crash risk for individual drivers remains uncertain.”

Insurance records show a similar increase in claims under collision coverage, which pays for damage to an at-fault, insured driver’s own vehicle, according to HLDI’s latest analysis. The legalization of retail sales in Colorado, Nevada, Oregon, and Washington was associated with a 4 percent increase in collision claim frequency compared with the other Western states from 2012 to 2019. That’s down slightly from the 6 percent increase HLDI identified in a previous study, which covered 2012  to 2018.

While the evidence that crash rates have increased in states that legalized marijuana is mounting, it appears that further study is needed to determine whether marijuana use alone is responsible. Preliminary data suggests people who use alcohol and marijuana together are accountable for most of the crashes.

Another factor may be that marijuana users in counties that do not allow retail sales are driving to counties that do. The increased travel could lead to more crashes, even if their crash risk per mile traveled is no higher than that of other drivers.

Auto Insurance, Insurers and the Economy

Auto insurance rates impacted by labor crunch, supply chain disruptions

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In a recent interview with CNBC, Dr. Michel Léonard, Triple-I vice president and senior economist, explained how the return to pre-pandemic driving levels is resulting in higher auto accident rates.

More accidents mean a larger volume of more expensive claims for insurers to pay because of higher repair costs, delays in repair time due to chip shortages, supply chain disruptions and a labor crunch.

The consumer price index showed that the auto insurance index was up 16.9 percent in May from the previous year, following a 6.4 percent rise in April from the previous year.

Elyse Greenspan, a managing director at Wells Fargo, said the year-over-year increase resulted from the premium base in May 2020, reflecting pandemic-related refunds. Triple-I analysis shows that due to the sharp declines in the number of miles driven, U.S. auto insurers returned $14 billion to their customers last year.

Greenspan describes the current auto insurance market as still soft even after recent rate increases. Not all insurers are raising rates, she added. “It’s still a good environment for consumers who are purchasing auto insurance.”

Auto Insurance, Theft

Valuable metals make catalytic converters an attractive target for thieves

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Huge spikes in catalytic converter theft have been reported throughout the nation in recent months. The anti-pollution devices contain precious metals such as platinum, palladium or rhodium and can be removed from the bottom of a car or truck in as little as five minutes.

Thieves are getting anywhere from $50 to $250 per converter from recyclers, according to the National Insurance Crime Bureau (NICB) and replacing the part can cost $900 or more.

In an effort to stem the thefts, the NICB has recently teamed up with several Virginia police departments to host catalytic converter etching events. During the events, mechanics etch and paint vehicle registration numbers onto the converters, which serves to track the parts if stolen.

Additional etching events are currently being scheduled in Virginia. The NICB encourages law enforcement across the nation to hold similar events to help combat catalytic converter theft.

Other theft prevention options include installing a steel shield that fits over the catalytic converter, requiring time and extra tools to remove the part; cages made of high-strength steel that’s difficult to cut; or stainless-steel cables welded from the catalytic converter to the car’s frame.

If your converter is stolen, the theft is covered by the optional comprehensive portion of your insurance policy in some cases. But you will be responsible for paying the deductible. If your deductible is $1,000 and the cost to repair the damage costs $1,000 or maybe a few hundred dollars more, you may not opt to file a claim.

Drivers are advised to contact their insurers to report the theft and determine the best course of action.

Auto Insurance, Health & Safety, Highway Safety

Expect a Memorial Day travel surge

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This Memorial Day weekend, the unofficial start of summer, many are feeling a renewed sense of hope as COVID-19 infection rates fall and vaccinated individuals are given the green light to travel.

Over 37 million Americans are planning trips of more than 50 miles from their homes this weekend, according to AAA, an increase of more than 60 percent from last year, but still 6 million fewer than 2019’s pre-pandemic travelers on the same weekend.

Drivers are reminded to exercise caution on the roads, as Memorial Day has some of the highest auto accident rates, with alcohol consumption as a major contributing factor.

Triple-I recently spoke with Forbes magazine about avoiding some of the other hazards of summer, including car theft, grill fires, and dog bite liability.

We hope that you take the extra precautions outlined in the Forbes article — as well as review your insurance coverage – and have a safe, healthy summer.

Auto Insurance, Health & Safety, Highway Safety

“Landscape of Fear”: What Wolves Can Teach Us About Risk Mitigation

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Reintroducing wolves into areas where they’ve previously been decimated seems to reduce car crashes involving deer by nearly 25 percent.

Huh? What? Is this one of those “Correlation doesn’t equal causation” memes?

Not at all.

Scientists in Wisconsin have gathered data about road collisions and wolf movements in the state to quantify how the arrival of wolves affected the frequency of deer-auto collisions.

“In a pretty short period of time, once wolves colonize a county, deer vehicle collisions go down about 24 percent,” said Dominic Parker, a natural resources economist at the University of Wisconsin, Madison and co-author of their new study published in the journal Proceedings of the National Academy of Sciences.

You might say, “Well, of course – wolves eat deer, fewer deer means fewer collisions.” But it’s a bit more subtle than that. The scientists found that reintroducing wolves created what scientists call “a landscape of fear.”

“When you have a major predator around, it impacts how the prey behave,” Parker said. “Wolves use linear features of a landscape as travel corridors, like roads, pipelines and stream beds. Deer learn this and can adapt by staying away.”

Just one study

Now, of course, this is just one study, and it’s not being embraced by everyone – for example, farmers and ranchers who don’t love the reintroduction of predators that might kill their livestock or add to the cost of protecting the animals they raise.

“People who value the existence of wolves are often not in the same communities where wolves are present,” said Jennifer Raynor, Parker’s colleague and co-author. “Urban wildlife lovers may be happy to know that wolves exist out there, but rural people have to stare at the carcasses of livestock and pets.”

Deer-vehicle collisions “are happening in both urban and rural areas,” Raynor said. “No one is avoiding this problem” – which means rural people are also benefiting from wolves, whether they realize it or not.

On average, 19,757 Wisconsinites collide with deer every year, leading to about 477 injuries and eight deaths. Wolves save the state $10.9 million in losses every year, the scientists determined —a figure 63 times greater than the total compensation paid for the loss of livestock or pets.

The average cost of an animal-strike claim under comprehensive coverage for 2001-14 models during calendar years 2004-13 was $2,730. That’s a hefty price but still lower than the average payout of $3,510 for a collision claim, the Highway Loss Data Institute has found.

More research needed

Guillaume Chapron at the Swedish University of Agricultural Sciences, who studies large carnivores, says the team hasn’t provided enough information about their statistical methods, the degree of uncertainty in their results, or details on how to replicate their analysis.

“It may be that they found a new dimension to the role played by wolves, but their paper makes a critical evaluation of their findings impossible,” he said. “I’m sure it will be loved by wolf advocates, but much less by statisticians.”

Eyes on natural risk mitigation

More research clearly is needed before anyone should begin advocating large-scale reintroduction of wolves into populous areas with an eye toward reducing auto insurance claims and premiums. But the study highlights an area to which insurers are paying increasing attention: natural risk mitigation.

For example, interest has risen in how restoration of natural ecosystems – such as mangrove forests and coral reefs – can reduce insured losses caused by storm surge caused by hurricanes.

In many places, mangroves are the first line of defense, their aerial roots helping to reduce erosion and dissipate storm surge. A healthy coral reef can reduce up to 97 percent of a wave’s energy before it hits the shore. Reefs — especially those that have been weakened by pollution, disease, overfishing, and ocean acidification — can be damaged by severe storms, reducing the protection they offer for coastal communities. 

In Florida, a recent study found, mangroves alone prevented $1.5 billion in direct flood damages and protected over half a million people during Hurricane Irma in 2017, reducing damages by nearly 25 percent. Another study found that mangroves actively prevent more than $65 billion in property damage and protect over 15 million people every year worldwide.

Communities, businesses, and families looking to reduce damages and their associated costs should look closely at natural, pre-emptive mitigation.

Learn More on the Triple-I Blog

Man-Made and Natural Hazards Both Demand a Resilience Mindset

Hurricane Delta Triggered Coral Reef Parametric Insurance

Mangrove Insurance: Parametric + Indemnity May Aid Coastal Resilience

Mangroves and Reefs: Insurance Can Help Protect Our Protectors

Auto Insurance, Insurers and the Economy

Here’s what’s happening to your auto insurance costs

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By James Lynch, Chief Actuary, Senior Vice President of Research and Education, Triple-I

You’ve probably been reading news stories about rising inflation, and auto insurance has been pulled into the picture. But that is a little misleading.

Auto insurance rates aren’t soaring. They are returning to normal, pre-pandemic levels.

Consumer prices in April were 4.2 percent higher than a year ago, the Bureau of Labor Statistics reported Wednesday, and its report picked out auto insurance as one of the areas that had “a large impact on the overall increase.”

Auto insurance rates were 2.5 percent higher in April than in March and 6.1 percent higher than a year ago.

That doesn’t mean, though, that the cost of auto insurance is skyrocketing. Remember that a year ago – April 2020 – insurers were busy returning billions of dollars to consumers because of the drastic change in driving patterns the pandemic brought on.

Those givebacks – which eventually totaled $14 billion – drove down the price of insurance, and the official inflation numbers reflected that.

Now driving patterns are returning to pre-pandemic norms – more or less. People are driving somewhat less than before, but they are driving faster and are much more likely to tinker with their smartphones or practice other distracting behaviors.

Premiums are reflecting the new normal, and in terms of the cost of insurance, that looks a lot like the old normal. The price of insurance, using BLS indices, is virtually unchanged from pre-pandemic levels – 0.01 percent higher than it was in March 2020, when the pandemic/recession began.

Auto Insurance, Homeowners Insurance

Be prepared for hail

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Hailstorms are among the most destructive weather events, with hailstones ranging in size from a pea to a grapefruit.  When these frozen missiles plummet from the sky, damage to cars and buildings can be severe.

Steve Bowen, a meteorologist at Aon and director of the broker’s Impact Forecasting unit, has said hail can contribute as much as 50 percent to 80 percent of severe convective storm losses in any given year, with tornadoes, wind and flooding providing the rest.


An April 28 storm that included apple-size hail in in some parts of the Dallas-Fort Worth region caused close to $400 million in insured losses, according to the Insurance Council of Texas. Spokesperson Camille Garcia says the loss estimate is based on 32,000 car and homeowners claims sent to insurers through May 3. Most came from Tarrant County and the city of Keller. Once roof inspections are completed many more claims are expected.

State Farm alone paid out $474.6 million in hail claims in Texas in 2020, according to the company’s most recent Hail Damage report.

While you can’t prevent hail from failing on your property, you can lessen the possible damage by putting vehicles in the garage and moving patio furniture under cover. Close blinds and curtains to prevent broken glass from blowing inside and possibly causing injuries or damage.

For homes without garages, which is common in the South, I’m told, hail-resistant car covers can be an effective option.

If you do experience hail damage, your auto and home insurance policies will cover it. Take lots of pictures of the damage and submit your claim as soon as you can.

If contractors come knocking on your door, hold off on signing repair contracts. Do your due diligence, deal with reputable contractors, and get references. Consult your insurance adjuster before signing any contracts.

Click here for more insurance tips.

For more on hail damage trends and mitigation tactics, see Triple-I’s paper Severe Convective Storms.

Auto Insurance, Homeowners Insurance

A Little Care Can Prevent Tree Damage to Property

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People have a mixed relationship with trees. On the one hand, trees provide beauty and shade – along with reducing carbon dioxide in the atmosphere and providing much of the oxygen we breathe. 

But let one fall on your house or bring your car to a sudden stop and suddenly trees become a problem.

For advice on keeping your trees healthy, your family safe, and preventing property damage, Triple-I talked to certified arborist Dylan Brown.

Much of the damage trees can cause to property is often covered by insurance. Generally speaking, if a tree hits your home or other insured structure, your standard homeowners insurance policy covers the damage to the structure and its contents.

Properly selected, placed, and maintained trees can provide excellent wind protection for a house, which can reduce heating costs and noise from neighbors and traffic. By putting thought and energy into planting and maintenance, homeowners can reap these benefits  while preventing much potential damage.

To minimize damage from your own trees, it’s important to maintain their health and properly prepare them for winter weather and storms.

While some trees don’t handle wind well, others can withstand some of the most powerful gusts. Blue River Restoration Services in Indianapolis recommends live oaks and maples, crepe myrtles, and cypress trees as “safe bets” when considering wind damage.

“These trees have strong roots to keep them in place and thick bark that supports them in windy conditions,” Blue River’s website says. It also recommends not to plant large shade trees within 12 feet of structures that could be damaged by tree roots.

“While most trees’ roots are not invasive enough to cause damage to your house or pavement, some will,” the website says. “Aspens, willows, American elms, and silver maples all have root systems that can stretch for acres. With these types of trees, there is no way to control their roots that can disrupt the foundation of your home.”

Tree roots don’t destroy the foundation but instead shift the soil under and around them, causing them to become unstable.

“Some homeowners deal with intrusive roots by grinding down or removing them,” Blue River says. “This can be expensive and is very harmful to the tree. Wounding a tree’s roots creates points of entry for pathogens, leaving a tree vulnerable to disease.”

A diseased tree is more likely to have branches that will break off and cause damage during high winds. Trees with inadequate root systems may blow over or break off at the ground line. A general rule is that you should not plant any trees within 20 feet of your house.

Insurance “what ifs?”

What happens if a neighbor’s tree falls on your house? You’ll need to file a claim with your insurance company. If negligence can be proved—such as a diseased tree or tree that wasn’t properly maintained — your company may try to collect from your neighbor’s policy. If that happens, you may be reimbursed for your deductible.

If a tree falls on your car, damage is covered under the comprehensive portion of your auto insurance policy.

Standard home insurance polices also provide coverage for damage to trees and shrubs due to fire, lightning, explosion, theft, aircraft, vehicles not owned by the resident, and vandalism Coverage is generally limited to about $500 for any one tree, shrub or plant.

For more Information:

If a Tree Falls on Your House, Are You Covered?

Understanding Trees and Tree Maintenance (a Triple-I video)

Preventing Trees From Falling (a Triple-I video)

Auto Insurance, Business Insurance, Business Risk, Emerging Risks, Legal Environment, Regulation, Workers Compensation

Cannabis Industry Prospects Brighten;Risks, Challenges Remain

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The future looks brighter every day for the cannabis industry.

From recent findings that cannabis components may lead to treatment or even prevention of coronavirus infection in lung cells to yesterday’s vote by the House of Representatives in favor of the Safe Banking Act, barricades to full legalization just keep falling.

This isn’t the first time the act – which would protect banks from federal penalties for doing business with cannabis-related businesses that comply with state laws – has made it through the House. It was first introduced in March 2019, and the House has approved it three times, only to have the Senate Banking Committee block its progress. But with the current Democrat majority, apparent bipartisan support, and growing public and state-government support for cannabis legalization, the fourth time just might be the charm.

Similar federal “safe harbor” legislation for the insurance industry – the Clarifying Law Around Insurance of Marijuana Act (CLAIM Act) – was introduced last month.

“More optimism”

The Drug Enforcement Agency characterizes cannabis as a Schedule I drug, defined as having “no currently accepted medical use and a high potential for abuse.” Without legislative change, banks and insurers can’t do business with business without risking running afoul of federal drug laws.

“There’s more optimism now and an assumption that they’re going to work to pass some of these bills that have been in motion for a while now, but never hit the point of actually moving forward,” said Max Meade, cannabis insurance advisor at Brown & Brown Insurance. “I’m also seeing more conversations around working to bundle some of these bills that they’ve been talking about and do a larger cannabis reform.”

As states continue to decriminalize marijuana to different degrees, one of the biggest issues facing cannabis businesses is the 280E federal tax burden, which means cannabis businesses can’t expense the normal cost of goods or anything a normal business can during the course of operation, from utilities to payroll and rent. This means marijuana businesses often pay federal income tax rates in the 65–75 percent range, compared to 15-30 percent  for other businesses. They are taxed on their gross revenues, unlike all regular businesses, which pay tax only on income after their expenses.

The Small Business Tax Equity Act would provide an exception into the Internal Revenue Code to let cannabis operators – as long as they’re in compliance with state laws – make the same deductions as any other business.

Easier to operate

Passage of these laws would make it easier for cannabis-related businesses to operate. The CLAIM Act would let these businesses obtain insurance to cover the same risks of theft, damage, injury, loss, and liability as all other businesses.  

“There are upwards of 30 surplus lines carriers and several managing general underwriters that currently service the cannabis industry across many lines of coverage,” the National Law Review reports. “There also is a small handful of admitted carriers that operate in California, and most recently in Arizona.”

While market capacity for property, commercial general liability, product liability and workers’ compensation coverage has expanded – these policies remain more expensive than the same coverage purchased by similar companies in other industries. Passage of the CLAIM Act would open the doors for more insurers and should bring the cost of insuring marijuana-related businesses much less expensive.

THC persistence a challenge

But challenges will remain – particularly with respect to the workplace. When marijuana was illegal under both state and federal law, employers would typically prohibit employees or employment candidates from using marijuana off-duty as a condition of employment. But as states have begun to permit medical marijuana, things have gotten a bit hazier.

No state requires companies to accommodate on-duty marijuana use. As with recreational marijuana, no state that permits medical marijuana requires employers to accommodate on-duty marijuana use, possession, or impairment. States will often explicitly state that medical marijuana laws don’t affect an employer’s drug-free workplace policy.

Does workers compensation cover a workplace accident in which the injured employee tested positive for marijuana? Persistence of THC – the main psychoactive compound in marijuana – complicates this question, and state courts have differed on this issue, depending on the individual details of each case.

THC persistence also complicates issues around impaired driving.

Auto Insurance, Insurance Industry, Regulation

Triple-I: Drivers Benefit from a Competitive Auto Insurance Market

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To maintain a competitive private-passenger auto insurance market, state lawmakers must allow insurers to use rating factors aimed at having lower-risk drivers pay less for coverage, according to the Insurance Information Institute’s (Triple-I) Chief Actuary.

“It seems clear that all parties sincerely want a more equitable society,” stated James Lynch, the Triple-I’s Chief Actuary, in testimony today to the National Council of Insurance Legislators’ (NCOIL) Special Committee on Race in Insurance Underwriting. “Working cooperatively, we can find solutions that address the issue of systemic racism while preserving the competitive environment that allows the insurance industry to keep its promises and protect its customers. At the same time, it is important that the discussion be based on thorough, fact-based research.”

In his prepared remarks to NCOIL’s 2021 Spring Meeting, Lynch underscored the importance of fact-based research when pricing accurately a private-passenger auto insurance policy. The Triple-I’s Chief Actuary emphasized how actuarial evidence supports the effectiveness of auto insurance rating factors (e.g., a driver’s age and driving record).  These factors, combined with dozens of others, such as credit-based insurance scores, effectively gauge the likelihood a driver will file a claim, multiple studies have found. In addition, Lynch noted rating factors are approved by state-based insurance regulators and insurers cannot use information about either a driver’s race or income when pricing their policies.

While addressing NCOIL’s Committee members, Lynch pointed out flaws and errors associated with a 2017 study conducted by ProPublica, in conjunction with Consumer Reports. It alleged insurers systematically overcharged drivers in minority communities in four states: California, Illinois, Missouri, and Texas.

“Once elemental errors in this report are corrected, findings show the exact opposite of what ProPublica asserted: auto insurers charge prices that properly reflect the actual risk in majority white and majority nonwhite neighborhoods,” Lynch stated.

Lynch shared in his testimony findings from Pinnacle Actuarial Solutions, a highly respected actuarial firm retained by the Triple-I, that found “multiple concerns with the analysis and resulting conclusions” in the ProPublica study. Moreover, Lynch also cited state regulators who disputed the key assertion made in ProPublica’s 2017 study.

A comprehensive analysis by the state of Missouri in 2018 determined, “no evidence was found that would indicate that higher-rated territories are charged more relative to risk than lower-rated territories.” Private-passenger auto insurers generally charge drivers more in higher-rated territories.

“The growing awareness of historical injustices make these unprecedented times,” Lynch added. “As the insurance industry, along with the rest of America’s business and governmental institutions, examines past injustices and appropriate remedies, it makes sense to incorporate high-quality, relevant research.”

RELATED LINKS:

White Paper:    Insurance Rating Variables: What They Are and Why They Matter (2019)

Infographics:   What Determines the Cost of My Auto Insurance?

Insurance Rating Variables: What They Are and Why They Matter