Category Archives: Highway Safety

Affordability, Auto Insurance, Highway Safety, Insurers and the Economy, Legal Environment, Technology

Clarifying Drivers of Rising Auto Premiums

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By Lewis Nibbelin, Research Writer, Triple-I

Personal auto insurance premiums represent multiple aspects of the affordability crisis U.S. consumers face today, and a panel discussion at the Brookings Center on Regulation and Markets this week helped define and clarify them.

Panel moderator Aaron Klein, Miriam K. Carliner Chair and senior fellow in Economic Studies at the Brookings Institution, began the discussion by acknowledging “the rising rates of car insurance are part of the broader set of topics that have been given the term ‘affordability.’”

Representing insurers, regulators, and consumers, the panelists included Sean Kevelighan, CEO of Triple-I; Justin Zimmerman, a former commissioner in New Jersey’s Department of Banking and Insurance; and Chuck Bell, programs director for advocacy at Consumer Reports.

All agreed that much of the blame for rising rates can be attributed to external factors such as the costs associated with safer, more technologically sophisticated vehicles, thereby raising the costs to repair and replace them. Inflation has exacerbated these impacts, with auto replacement costs up 28 percent from 2021 to 2025. Over the past 12 months, inflation increased 4.2 percent, thanks in large part to geopolitical risks, supply-chain disruptions, and rising oil prices.

Disagreement surfaced, however, around the degree of insurance-industry responsibility for insurance costs. Consumer Reports’ Chuck Bell suggested the $14 billion insurers issued in rebates to consumers during the COVID-19 pandemic was insufficient, prompting Kevelighan to point out that, “of all the refunds being given, you saw the most coming out of the insurance business and community.” Zimmerman noted that many states also froze insurers’ ability to raise rates during the pandemic, leading to some post-pandemic “rate catch-up.”

Rampant legal system abuse helps fuel the strain. While derided as a concept by some, Kevelighan cited analysis from Triple-I and the Casualty Actuarial Society that indicates excessive litigation added up to $281.2 billion in increased liability insurance losses from 2015 to 2024 – a finding that economic inflation alone cannot explain. A separate Triple-I report on civil case filings indicated roughly one-third of increasing inflation in auto liability losses stemmed from these legal trends.

Kevelighan also highlighted the $380 million spent by third-party litigation funders (TPLF) on online advertising last year, according to a study from the National Insurance Crime Bureau and 4WARN. Now “a global multi-billion-dollar asset class,” TPLF has become a target for reform in a growing number of states, notably New York.

New York affordability struggles

Wiping out billions of dollars in U.S. economic activity annually, legal system abuse costs New York residents 427,794 jobs and $7,027 per household per year, contributing to the fourth-highest auto insurance expenditures in the nation, Triple-I estimates. Moreover, the state’s average personal auto injury claim is $46,726, at more than twice the national average.

Building on legislation to tackle TPLF, New York lawmakers recently passed a package of auto insurance reform bills to disincentivize legal system abuse and fraud, one of which will introduce a $100,000 cap on noneconomic damages for drivers who were at fault, uninsured, or impaired at the time of an accident. Comparative negligence rules were also updated to ensure costs cannot be shifted away from the motorists responsible for an accident.

Kaitlin Asrow, New York State’s acting superintendent for the Department of Financial Services, told Klein in an interview before the panel, “Over the last five years, suspicious fraud reports for just no-fault auto increased 80 percent.” She added that “staged accidents were up 34 percent” in New York City alone during the same period.

While further reforms are needed to address the Empire State’s high insurance costs, Kevelighan pointed out that similar efforts in Florida have begun to drive substantial premium reductions and renewed private market competition.

Modifying behavior for risk reduction

Though many influences on insurance costs are structural, Kevelighan emphasized “a lot of this comes down to our behaviors and how we’re driving and living.” As such, insurance must shift from “a once or twice a year type of transaction” to “an open and ongoing conversation” between insurers and their customers.

Part of that conversation revolves around distracted driving, which jumped significantly after the onset of the COVID-19 pandemic and remains at elevated levels. As measured by a recent Nationwide survey, seven in ten commercial drivers have reported experiencing increased distraction as well as reckless driving from other drivers, at a 10-point increase from 2025.

Nationwide also found that telematics commercial auto loss ratios drop by at least 30 percent when policyholders use telematics, a technology that monitors mileage, braking and acceleration, and other driving patterns to provide real-time feedback that can adjust unsafe behavior. In addition, built-in accident-avoidance systems are reducing rear-end collisions by 40 to 50 percent.

Noting telematics research is still in its early stages, Kevelighan said the “interaction and exchange” of risk information between insurers and policyholders “is where the industry is going to start shifting from just detecting and repairing after a catastrophe to predicting and preventing.”

“We’ve got to make sure we’re balancing out what it is that we’re doing to reduce our risk, because that’s the real driver,” Kevelighan explained. “When we reduce the risk, we can reduce the cost.”

Learn More:

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Florida Premiums Drop Amid Post-Reform Stability

New York Among Least Affordable States for Auto Insurance

Triple-I Testifies on New York Insurance Affordability

Revealing Hidden Cost to Consumers of Auto Litigation Inflation

Auto Insurance, Highway Safety, Theft

U.S. Vehicle Thefts Hit Lowest Level in Decades

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By Lewis Nibbelin, Research Writer, Triple-I

Vehicle thefts dropped 23 percent nationwide in 2025, marking the second consecutive year of historic declines, according to the latest analysis from the National Insurance Crime Bureau (NICB).

At 659,880 thefts, last year’s drop built on the momentum of a 17 percent decline in 2024, previously the largest decrease in total thefts in four decades. Several jurisdictions experienced even greater year-over-year decreases, with vehicle theft down by 39 percent in Washington, 35 percent in Colorado, and 34 percent in Puerto Rico.

“Coordinated prevention efforts by law enforcement, auto manufacturers, insurance companies, and the National Insurance Crime Bureau are having a major impact on vehicle thefts nationwide,” said NICB president and CEO David J. Glawe, adding that such efforts “remain key to protecting families, businesses, and communities nationwide.”

Vehicle thefts surged in 2020 to about one vehicle stolen every 36 seconds, fueled in part by shutdowns during the COVID-19 pandemic. Levels remained elevated into 2023, which recorded more than one million thefts as social media trends highlighting vehicle security system vulnerabilities gained traction.

Many trends targeted Kia and Hyundai models, comprising six of the ten most stolen vehicles that year. In response, both manufacturers began implementing stronger prevention measures and software updates, reducing their share of total thefts from 21 percent in 2023 to 14 percent in 2025.

Despite overall progress, vehicle theft across the U.S. still occurs every 48 seconds, the NICB reported. Urban communities are at greater risk, with more than one-third of thefts concentrated in the top ten metro areas in 2025. Accordingly, California – home to three of the top ten areas – recorded the highest number of vehicle thefts in 2025, contributing more than 20 percent of the nation’s total.

Beyond the direct financial cost of losing these assets, theft of vehicles or car components add upward pressure on auto insurance rates, particularly within areas known to be high-risk. The cost to repair and replace stolen vehicles is also rising, compounding a market already impacted by mounting fraud and legal system abuse across the country.

While systemic improvements have helped improve theft rates, vehicle owners must take steps to help mitigate their own risk. Triple-I recommends the following precautions:

  • Keep doors locked and windows shut anytime a vehicle is left unattended.
  • Hide valuables in the trunk to prevent creating an additional target on the vehicle.
  • Park in secure, highly trafficked, and well-lit areas. In public parking areas, stay as close as possible to guard booths or store entrances. Keep personal garages locked.
  • Consider anti-theft devices such as audible alarms and steering wheel locks. Many new cars include tracking devices, which can help locate a stolen vehicle, but these are also available for purchase and installation in older cars. Check with an insurance professional to learn how anti-theft devices can qualify policyholders for premium discounts.
  • Exploit vehicle identification (VIN) numbers. A number of law enforcement agencies and insurance databases can use a VIN number to make it harder for car thieves to sell a stolen car or its parts.

Staying protected through adequate insurance coverage is also essential. Policyholders with auto policies that meet state-required minimums may lack coverage for vehicle theft or damage from theft, which is typically provided through optional comprehensive insurance.

Auto Insurance, Highway Safety, Technology

Parents Eye IoT
to Address Perils
of Teen Driving

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Parents are increasingly open to using technology to keep their teen drivers safe on the road, a recent survey from Nationwide finds.

The survey found 4 out of 5 parents would enroll their teens in telematics programs that reward safe driving. This enthusiasm for tech-based solutions comes despite mixed parental assessments of their teens’ driving abilities: While 42 percent rate their teen’s driving as “good” or “excellent”, similar percentages express concerns about distracted driving and reckless behavior.

“Parents want to feel confident that their teens are making smart choices behind the wheel,” says Casey Kempton, Nationwide president of P&C personal lines. “These tools help make that possible—not just by monitoring behavior, but by encouraging better habits through positive reinforcement.”  

Despite recognizing the value of safety technology, adoption remains limited. While 96 percent of parents said they believe dashcams provide valuable evidence after accidents, only 26 percent of teen drivers actually have them installed.

The survey reveals a broader trend in which consumers are drawn to telematics and monitoring technologies, though motivations vary. While parents prioritize safety benefits, many consumers are equally interested in the insurance premium discounts these programs can provide.

“This isn’t just about technology,” Kempton says. “It’s about creating a culture of accountability and shared responsibility on the road.”  

As comfort with AI-enabled monitoring grows, it appears that families are embracing a future in which technology supports — but does not replace — good judgment.  

Learn More:

IoT Solutions Offer Homeowners, Insurers Value — But How Much?

How Insurers Address Talent Gap Through Innovation & Technology

JIF 2025 “Risk Takes”: Data Solutions for Today’s Challenges

Insurtech Funding Hits Seven-Year Low, Despite AI Growth

Auto Insurance, Highway Safety

Executive Exchange: Importing European Safety to U.S. Roads

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Road safety efforts in Europe offer numerous examples and success stories from which U.S. jurisdictions are learning. In the latest Triple-I Executive Exchange, MAPFRE USA President and CEO Jaime Tamayo sat down with Triple-I CEO Sean Kevelighan to discuss these learnings from an insurance perspective.

“In Europe, road-related fatalities are significantly lower than in the U.S., and we wanted to get a better understanding as to why,” Tamayo said. “We brought together leading experts and policymakers from Europe and the U.S. in transportation, urban planning, public health, and technology to discuss ways in which we can improve policies, innovation, enforcement, and education around safe driving.”

Through its charitable foundation, Fundación MAPFRE, the Spain-based reinsurer is dedicated to “Vision Zero” – a movement begun in Sweden in 1997 with a goal of eliminating traffic fatalities and injury-sustaining crashes. In connection with exporting this effort to the United States, Mapfre for more than 20 years has sponsored a program for the Massachusetts Department of Transportation that consists of a fleet of vehicles that patrol main highways and thoroughfares in the state, helping stranded motorists get back on the road.

“The program has been a great success,” Tamayo said, “covering over 30 million miles of road since its inception.”

 In addition to Massachusetts, Vision Zero has been taking hold in communities across the United States, including metropolitan areas such as New York City, Los Angeles, and Portland, Ore.

In Portland, several data points are helping government officials better understand how to reduce traffic fatalities and injuries, including a high percentage of pedestrian crashes occurring because of long distances between marked crossings. Portland has taken the initiative, building “a system to protect pedestrians includes frequent safe crossings, street lighting, a cultural acceptance of slower speeds and people educated about how to interact safely on the streets.”

In Vision Zero city Hoboken, N.J., seven years have passed without a traffic fatality, even as traffic deaths have reached a 40-year high across the nation.

Learn More:

Triple-I “Trends and Insights”: Personal Auto Insurance Rates (Members only)

Triple-I “Trends and Insights” Commercial Auto (Members only)

IRC Report: Personal Auto Insurance State Regulation Systems

Despite Improvements, Louisiana Is Still Least Affordable State for Auto Insurance

Georgia Is Among the Least Affordable States for Auto Insurance

Report: No-Fault Reforms Improved Michigan’s Personal Auto Insurance Affordability

Auto Insurance, Business Insurance, Business Risk, Highway Safety, Insurers and the Economy, Market Conditions

Improved Commercial Auto Underwriting Profitability Expected After Years of Struggle

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The commercial auto insurance line has struggled to achieve underwriting profitability for years, even before the inflationary conditions that have been affecting property/casualty lines more recently. This trend has been accompanied by steady growth in net written premiums (NWP).

This weakness in underwriting profitability has been driven by several causes, according to a new Triple-I Issues Brief. One is the fact that vehicles – both commercial vehicles and personal vehicles they collide with – have become increasingly expensive to repair, thanks to new materials and increased reliance on sensors and computer systems designed to make driving more comfortable and safer. This well-established trend has been exacerbated by supply-chain disruptions during COVID-19 and continuing inflation in the pandemic’s aftermath.

Distracted driving and litigation trends also have played a role.

However, Triple-I sees some light on the horizon for commercial auto in terms of the line’s net combined ratio – a standard measure of underwriting profitability calculated by dividing the sum of claim-related losses and expenses by earned premium. A ratio under 100 indicates a profit and one above 100 indicates a loss.

As the chart below shows, the estimated 2024 net combined ratio for commercial auto insurance has improved slightly since 2023, and further improvement is expected over the next two years.

These projected improvements are based on an expectation of continued premium growth – due more to aggressive premium rate increase than to increased exposure – as the rate of insured losses levels off.

Auto Insurance, Highway Safety, Legal Environment

Despite Improvements, Louisiana Is Still
Least Affordable State for Auto Insurance

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Max Dorfman, Research Writer, Triple-I

Louisiana’s personal auto insurance affordability improved to 2.67 percent of median household income in 2022 – down from 2.93 percent in 2020 – but it retains the dubious distinction of being the least affordable state, Triple-I’s chief insurance officer told the Louisiana House Insurance Committee in recent testimony.

Dale Porfilio – who also is president of the Insurance Research Council (IRC) – said that by nearly every metric the state’s insurance cost drivers are well above the national average:

  • Accident frequency – Louisiana is 16 percent higher than the national average;
  • Repair cost severity – Louisiana is 9 percent higher;
  • Injury claim relative frequency – Two out of every four property damage claims (when cars hit cars) in Louisiana result in bodily injury claims (49 percent), twice the one out of every four (25 percent) across all states;
  • Medical utilization – Louisiana is 47 percent higher;
  • Attorney involvement – Louisiana is 24 percent higher;
  • Underinsured motorists – At-fault drivers in Louisiana have insufficient liability insurance limits in over 35 percent of multi-car accidents, over twice the 16 percent U.S. average; and
  • Claims litigation – Litigation over personal auto claims in Louisiana is more than twice the national average, surpassed only by Florida.

Porfilio noted that for auto insurance affordability to improve, overall expected losses will need to be reduced. Legislation to reduce one or more of these key cost drivers would be helpful, Porfilio said.

As Triple-I and IRC previously reported, the combination of high insurance expenditures and low median income make Louisiana a difficult state in which to lower costs. The frequency of hurricanes hitting the state increases homeowners insurance costs, and the high cost of reinsurance has contributed to the Louisiana’s insurance woes.

In fact, in 2020 and 2021, in the wake of Hurricane Laura and Hurricane Ida, insurers paid out more than $23 billion in insured losses from over 800,000 claims filed.

While Louisiana policymakers were confident a $45 million fund approved in February 2023 to encourage insurers to write property insurance business in the state would help stabilize the market, insurance commissioner Jim Donelon recognized that the approved grants are only the first step toward reducing homeowners’ insurance rates.

As Porfilio’s testimony demonstrated – and the market has dictated – more work is needed to lower costs for consumers and insurers in Louisiana.

Auto Insurance, Highway Safety, Industry Financials, Insurers and the Economy, Legal Environment

Auto Insurers’ Performance Improves, But Don’t Expect Rates
to Flatten Soon

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Several metrics that influence auto insurance premium rates are starting to improve, but it will take time for these improvements to be reflected in flattening rates, according to a recent Triple-I Issues Brief.

Direct premiums written and underwriting profitability improved dramatically in 2023.  Additionally, 2023 net written premium growth of 14.3 percent is the highest in over 15 years. These are great gains, but it’s important to remember that they come on top of results in 2022 that were the worst in recent years.

The number of drivers on the road and miles driven have returned to pre-pandemic levels – but the risky driving behaviors that led to high losses during the pandemic have not improved. More accidents with severe injuries and fatalities have driven up claims and losses in terms of both vehicle damage and liability, while attracting greater attorney involvement and legal system abuse. Compounding these conditions has been historically high inflation, which puts upward pressure on the material and labor costs, increasing the cost of claims.

Telematics technologies, which allow insurers to analyze risk profiles and tailor rates based on individual driving habits, offer the possibility of some relief. By providing feedback that can influence driving behavior, telematics has been shown to lower risk and help reduce the cost of insurance. An Insurance Research Council survey found 45 percent of drivers said they made significant safety-related changes in how they drove after participating in a telematics program. Another 35 percent said they made small changes.

But broader risk and economic factors are likely to keep premium rates high in most cases for the foreseeable future.

Auto Insurance, Highway Safety, Legal Environment, Regulation

New Illinois Bills
Would Harm — Not Help — Auto Policyholders

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Two bills proposed in Illinois this year illustrate yet again the need for lawmakers to better understand how insurance works. Illinois HB 4767 and HB 4611 – like their 2023 predecessor, HB 2203 – would harm the very policyholders the measures aim to help by driving up the cost for insurers to write personal auto coverage in the state.

“These bills, while intended to address rising insurance costs, would have the opposite impact and likely harm consumers by reducing competition and increasing costs for Illinois drivers,” said a press release issued by the American Property Casualty Insurance Association, the Illinois Insurance Association, and the National Association of Mutual Insurance Companies. “Insurance rates are first and foremost a function of claims and their costs. Rather than working to help make roadways safer and reduce costs, these bills seek to change the state’s insurance rating law and prohibit the use of factors that are highly predictive of the risk of a future loss.”

The proposed laws would bar insurers from considering nondriving factors that are demonstrably predictive of claims when setting premium rates.

“Prohibiting highly accurate rating factors…disconnects price from the risk of future loss, which necessarily means high-risk drivers will pay less and lower-risk drivers will pay more than they otherwise would pay,” the release says. “Additionally, changing the rating law and factors used will not change the economics or crash statistics that are the primary drivers of the cost of insurance in the state.”

Triple-I agrees with the key concerns raised by the other trade organizations. As we have written previously, such legislation suggests a lack of understanding about risk-based pricing that is not isolated to Illinois legislators – indeed, similar proposals are submitted from time to time at state and federal levels.

What is risk-based pricing?

Simply put, risk-based pricing means offering different prices for the same level of coverage, based on risk factors specific to the insured person or property. If policies were not priced this way – if insurers had to come up with a one-size-fits-all price for auto coverage that didn’t consider vehicle type and use, where and how much the car will be driven, and so forth – lower-risk drivers would subsidize riskier ones. Risk-based pricing allows insurers to offer the lowest possible premiums to policyholders with the most favorable risk factors. Charging higher premiums to insure higher-risk policyholders enables insurers to underwrite a wider range of coverages, thus improving both availability and affordability of insurance.

This simple concept becomes complicated when actuarially sound rating factors intersect with other attributes in ways that can be perceived as unfairly discriminatory. For example, concerns have been raised about the use of credit-based insurance scores, geography, home ownership, and motor vehicle records in setting home and car insurance premium rates. Critics say this can lead to “proxy discrimination,” with people of color in urban neighborhoods sometimes charged more than their suburban neighbors for the same coverage.

The confusion is understandable, given the complex models used to assess and price risk and the socioeconomic dynamics involved. To navigate this complexity, insurers hire teams of actuaries and data scientists to quantify and differentiate among a range of risk variables while avoiding unfair discrimination.

While it may be hard for policyholders to believe factors like age, gender, and credit score have anything to do with their likelihood of filing claims, the charts below demonstrate clear correlations.

Policyholders have reasonable concerns about rising premium rates. It’s important for them and their legislators to understand that the current high-rate environment has nothing to do with the application of actuarially sound rating factors and everything to do with increasing insurer losses associated with higher frequency and severity of claims. Frequency and claims trends are driven by a wide range of causes – such as riskier driving behavior and legal system abuse – that warrant the attention of policymakers. Legislators would do well to explore ways to reduce risks, contain fraud other forms of legal system abuse, and improve resilience, rather than pursuing “solutions” to restrict pricing that will only make these problem worse.

Learn More

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Illinois Bill Highlights Need for Education on Risk-Based Pricing of Insurance Coverage

How Proposition 103 Worsens Risk Crisis in California

Louisiana Still Least Affordable State for Personal Auto, Homeowners Insurance

IRC Outlines Florida’s Auto Insurance Affordability Problems

Education Can Overcome Doubts on Credit-Based Insurance Scores, IRC Survey Suggests

Colorado’s Life Insurance Data Rules Offer Glimpse of Future for P&C Writers

It’s Not an “Insurance Crisis” – It’s a Risk Crisis

Indiana Joins March Toward Disclosure of Third-Party Litigation Funding Deals

Litigation Funding Law Found Lacking in Transparency Department

Cyber Risk, Disaster Resilience, Earthquakes, Floods, Highway Safety, Insurers and the Economy, Terrorism Risk

It’s Not an “Insurance Crisis” — It’s a Risk Crisis

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Ten states – Louisiana, Florida, Idaho, Kentucky, Mississippi, Montana, North Dakota, South Carolina, Texas, and Virginia – as well as additional plaintiffs, are suing the Federal Emergency Management Agency (FEMA) over its new methodology for pricing flood insurance, Risk Rating 2.0. On Sept. 14, a federal hearing lasted six hours as the plaintiffs sought a preliminary injunction to halt the new pricing regime while the lawsuit plays out.

Many residents of these states are understandably upset about seeing their flood insurance premium rates rise under the new approach. There may not be much comfort for them in knowing that the current system is much fairer than the previous one, in which higher-risk homeowners subsidized those with lower risks. Similarly, policyholders who have had their premium rates reduced under Risk Rating 2.0 are unlikely to take to the streets in celebration.

These homeowners aren’t alone in seeing insurance rates rise – or even having to struggle to obtain insurance. And these difficulties aren’t confined to holders of flood insurance policies. Florida and California are two states in which insurers have been forced to rethink their risk appetite – due in part to rising natural catastrophe losses and in part to regulatory and litigation environments that make it increasingly difficult for insurers to profitably write coverage.

Even before the COVID-19 pandemic and Russia’s invasion of Ukraine – and the supply-chain and inflationary pressures they created – the property/casualty insurance market was hardening as insurers adjusted their pricing and their risk appetites to keep pace with conditions that were driving losses up and eroding underwriting profitability – topics Triple-I has written about extensively (see a partial list below).

“Rising insurance rates are not the problem,” says Dale Porfilio, chief insurance officer at Triple-I. “They are a symptom of rising losses related to a range of factors, from climate and population trends to post-pandemic driving behaviors and surging cybercrime to antiquated policies, outdated building codes, fraud, and legal system abuse.”

In short, we are not experiencing an “insurance crisis,” as many media outlets tend to describe the current state of the market; we are experiencing a risk crisis. And even as the states referenced above push back against much-needed flood insurance reform, legislators in several states have been pushing measures that would restrict insurers’ ability to price coverage accurately and fairly – rather than addressing the underlying perils and forces aggravating them.  

Triple-I, its members, and a range of partners are working to educate stakeholders and decisionmakers and promote pre-emptive risk mitigation and investment in resilience. We are using our position as thought leaders and our unique non-lobbying role in the insurance industry to reach across sector boundaries and drive constructive action. You will be hearing more about these efforts over the next few months.

The success of these efforts will require a collective understanding among stakeholders and decisionmakers that for insurance to be available and affordable frequency and severity of risk must be measurably reduced. This will require highly focused, integrated projects and programs – many of them at the community level – in which all stakeholders (co-beneficiaries of these efforts) will share responsibility.

Want to know more about the risk crisis and how insurers are working to address it? Check out Triple-I’s upcoming Town Hall, “Attacking the Risk Crisis,” which will be held Nov. 30 in Washington, D.C.

Learn More:

Shutdown Threat Looms Over U.S. Flood Insurance

FEMA Incentive Program Helps Communities Reduce Flood Insurance Rates for Their Citizens

More Private Insurers Writing Flood Coverage; Consumer Demand Continues to Lag

Shift in Hurricane Season’s Predicted Severity Highlights Need for Prospective Cat Risk Pricing

California Needs to Make Changes to Address Its Climate Risk Crisis

Illinois Bill Highlights Need for Education on Risk-based Pricing of Insurance Coverage

IRC Outlines Florida’s Auto Insurance Affordability Problems

Education Can Overcome Doubts on Credit-Based Insurance Scores, IRC Survey Suggests

Matching Price to Peril Helps Keep Insurance Available & Affordable

Triple-I “State of the Risk” Issues Brief: Flood

Triple-I “State of the Risk” Issues Brief: Hurricanes

Triple-I Issues “Trends and Insights” Brief: Risk-Based Pricing of Insurance

Auto Insurance, Highway Safety

Michigan Drivers Benefit From No-Fault Reforms; Rulings Constrain Gains

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By Max Dorfman, Research Writer, Triple-I

The success of Michigan’s no-fault insurance reforms at reining in claims and contributing to premium reductions for many drivers has been crimped by adverse court decisions in cases contesting the reforms and other factors, according to new research by two Triple-I non-resident scholars. 

Michigan can be viewed as “an experiment on both the promises and pitfalls of a grand vision for no-fault auto insurance,” say the authors, Patricia Born, Ph.D. of Florida State University and Robert Klein, Ph.D. of Temple University.  The policy brief, No-Fault Auto Insurance Reform in Michigan: An Initial Assessment Revised, updates prior research by the scholars. It evaluates the reforms and finds that – in addition to reduced claims and beneficial effects on many drivers’ premiums — “it also appears that the number of uninsured drivers has fallen significantly.”

Michigan’s high auto insurance premiums contributed to a large percentage of uninsured drivers. In fact, Michigan was estimated to have the second-highest percentage of uninsured drivers among the states in 2019, at nearly 26 percent.

“This motivated the state’s Governor and Legislature to significantly reform its no-fault law and revise its regulation of auto insurance,” the report says. “The reforms were enacted in 2019 and were phased in from 2019 through 2021. While these reforms and regulatory changes are relatively nascent, there is considerable interest in knowing their effects, including the consequences of eliminating unlimited medical benefits, instituting medical cost controls, and tightening auto insurance rate regulation.”

PIP costs in the state had previously caused skyrocketing premiums due to the high medical costs associated with this coverage. The researchers’ data demonstrates that PIP claims costs dropped significantly because of these reforms.

Additionally, Michigan’s verbal threshold for liability claims appears to have reduced auto insurance costs and premiums in Michigan relative to other states. However, these savings were engulfed by its high PIP costs prior to the reforms. With PIP costs decreasing, the overall cost of liability coverage has also declined.

Now, the number of uninsured drivers has also fallen as auto insurance has become more affordable due to the reforms. Overall, Michigan’s average auto insurance premium for all coverages dropped from $2,611 in 2019 to $2,112 in 2021 – an 18.3 percent decrease. From 2019 to the first quarter of 2023, the average liability premium declined from $825 to $629 – a 23.8 percent decrease. The average loss cost for PIP in Michigan fell almost 40 percent, from $465 in 2019 to $280 in 2023.

Despite these benefits, the paper says, “There are stakeholders who question whether the reforms have created a better system and are seeking to reverse or modify some of them.”

According to the study, some drivers expected greater premium savings than they have received.  Other parties who benefited from the old system (for example, medical providers and trial attorneys) “are seeking to reverse or temper at least some of the reforms that were enacted,” the paper says.

PIP claims costs have begun to rise within the last year due to recent adverse court rulings, as well as other factors, such as more frequent auto accidents.

Learn More:

Michigan No-Fault Reform Yields Fewer Claims, Lower Premiums

Despite Fewer Claims, Personal Auto Insurance Payouts Increase