Triple-I fields a lot of questions from consumers and the media as to exactly how inflation affects insurance premium rates. As we explain in a new Issues Brief, the relationship between inflation and rates is, in one sense, straightforward – and yet the outcomes are not necessarily what you might expect.
As material and labor costs rise, the cost to repair and replace damaged homes and vehicles increases. If premium rates didn’t reflect these increased costs, insurers would quickly exhaust the funds they set aside – “policyholder surplus” – to ensure that they can afford to keep their promises to pay all claims. If losses and expenses exceed revenues by too much for too long, they risk insolvency.
But insurers do more than pay claims: They employ people (labor costs) and conduct business operations (supplies and energy costs); and, if they are to remain in business, they have to earn a reasonable profit.
So, when inflation and replacement costs rise, one might reasonably expect a proportionate increase in auto and homeowners insurance premium rates. But, as the charts below show, rates remained relatively flat during 2021’s sharply higher costs that coincided with the height of the COVID-19 pandemic.
In addition to not increasing rates proportionately to rising costs, personal auto insurers – expecting reduced losses as fewer drivers were on the road during lockdown – returned about $14 billion to policyholders through cash refunds and account credits. While loss ratios fell briefly and sharply in 2020, they have since climbed steadily to exceed pre-pandemic levels.
With drivers fully on the road again, this loss trend is expected to continue.
It’s important to remember that the decreases in CPI and replacement costs indicated above do not represent cost declines but, rather, reduced rates of growth. These and other forces – such as unfavorable accident fatality trends and population shifts into disaster-prone regions – will continue to apply upward pressure on premium rates.
Moderating inflation and replacement costs provide glimmers of hope for property & casualty insurers, but underwriting profitability will remain a challenge for most lines of business for the foreseeable future, according to actuaries at Triple-I and Milliman, a risk-management, benefits, and technology firm. Their findings were presented at a Triple-I’s quarterly members-only webinar.
Dr. Michel Léonard, Triple-I chief economist and data scientist, forecast that costs of materials and labor involved in replacing or repairing insured property will decline from 8.1 percent at year-end 2022 to 4.5-6.5 percent at the end of 2023 on the way to 0.9 percent in 2024. Supply-chain issues since the start of the COVID-19 pandemic and Russia’s invasion of Ukraine have kept replacement costs at historic highs.
When the cost to repair or replace damaged cars or homes is high, premium rates that determine how much policyholders pay for coverage should rise proportionately. As Triple-I has previously reported, though, this has not been the case for homeowners and auto insurance. Premium rates for both of these lines of insurance have not kept up with rising costs. As a result of these and other factors, insurers have struggled to remain profitable.
Personal auto replacement costs, Dr. Léonard projected, will fall from nearly 10 percent to near 0 percent by 2024. Homeowners replacement costs are predicted to fall from 7.6 percent to below 2 percent by 2024.
Worsening profitability generally
The P&C industry’s 2022 combined ratio – a measure of underwriting profitability – is estimated at 105.8, a 6.3-point worsening from 2021. Combined ratio represents the difference between claims and expenses paid and premiums collected by insurers. A combined ratio below 100 represents an underwriting profit, and one above 100 represents a loss.
For the overall P&C industry underwriting projections, Porfilio said, “We forecast premium growth of 8.4 percent in 2022 and 8.5 percent in 2023, primarily due to hard market conditions and exposure growth.”
The personal auto line of insurance has been a primary driver of the industry’s weak underwriting results. Dale Porfilio, Triple-I’s chief insurance officer, said the 2022 net combined ratio for personal auto insurance is forecast at 111.8, 10.4 points worse than 2021 and 19.3 points worse than 2020. He said supply-chain disruption, labor shortages, and costlier replacement parts all contribute to current and future loss pressures.
For the commercial multi-peril line, Jason B. Kurtz, a principal and consulting actuary at Milliman, said underwriting losses are expected to continue.
“Insurers will need to consider rate increases to offset economic and social inflation loss pressures,” Kurtz said.
Dave Moore, president of Moore Actuarial Consulting, said the 2022 combined ratio for commercial auto is forecast to have worsened in 2022. Moore also stated that general liability is deteriorating.
“We forecast a small underwriting profit for 2023 and 2024, but inflation and geopolitical risk put pressure on these forecasts,” he said, adding, “premium growth from the hard market is forecast to slow in 2022 to 2024.”
For the commercial property line, Kurtz noted that the industry is seeing strong premium growth and that rate increases should help alleviate some of the pressure from catastrophe losses. Despite Hurricane Ian, he said he expects an underwriting profit in 2022, continuing into 2023 and 2024.
Donna Glenn, chief actuary at the National Council on Compensation Insurance, noted that the workers compensation line of business has seen declines in rates and loss costs for several years, partially driven by reductions in on-the-job accident frequency. This line, Glenn added, is expected to continue its profitability.
Inflation, interest rates, and recession will dominate the U.S. economic narrative in the first quarter of 2023, shifting in the second and third to a focus on timing of recovery and a more neutral monetary policy and, in the fourth, whether and when the Fed will signal the start of a new easing cycle, according to Triple-I Chief Economist and Data Scientist Dr. Michel Léonard.
“We forecast the U.S. economy to grow 3.2 percent in 2023, up from 2.6 percent in 2022,” Léonard says. The U.S. Consumer Price Index (CPI) ended 2023 at 6.5 percent year over year, down from a high of 9.1 percent year over year in June. “Triple-I expects inflation to continue to decline throughout 2023, though not equally from one to the next quarter. The pace and extent of any inflation slowdown are predicated on improvements in global geopolitical risk.”
P&C underlying growth, which has been below overall GDP since the start of the pandemic, is likely to grow at a faster pace than the rest of the U.S. economy throughout the year.
“We remain cautious and forecast insurance underlying growth for 2023 to be around 3 percent, up from 2 percent in 2022,” Léonard says. “We forecast P&C replacement costs to increase by between 4.5 percent and 6.5 percent year-over-year in 2023. P&C replacement costs increased on average 25 percent since the beginning of the COVID-19 pandemic in 2020.”
Even though Triple-I expects economic fundamentals to improve throughout 2023, line-specific underwriting considerations will continue to depress performance, Léonard says.
Triple-I members can access the Triple-I’s Economic Dashboard, available at the organization’s members-only website. The Dashboard’s ongoing updates allow insurance industry professionals to follow key economic reports (e.g., federal governmental updates on interest rate, unemployment, and housing trends) in real time, adjust forecasts, and recalibrate strategy. Each quarter, the Triple-I’s Outlook provides a road map about which key economic reports will most impact insurance industry performance.
To learn about the benefits of Triple-I membership, click here.
A new data-reporting mandate the U.S. Treasury Department’s Federal Insurance Office (FIO) is considering imposing on certain property/casualty insurers raises a variety of concerns both for insurers and their policyholders.
In response to a request for comments on the proposed data call, Triple-I has told FIO that the requested data would be duplicative, could lead to misleading conclusions, and – by increasing insurers’ operational costs – would ultimately lead to higher premium rates for policyholders.
“Fulfilling this new mandate would require insurers to pull existing staff from the work they already are doing or hire staff to do the new work, increasing their operational costs,” Triple-I wrote. “As FIO well knows, state-by-state regulation prevents insurers from ‘tweaking’ their cash flows in response to change the way more lightly regulated industries can. Higher costs inevitably drive increases in policyholder premium rates.”
President Biden’s Executive Order on Climate-Related Financial Risk, issued in May of 2021, emphasized the important role insurers can play in addressing these risks. The order authorizes FIO “to assess climate-related issues or gaps in the supervision and regulation of insurers” and to assess “the potential for major disruptions of private insurance coverage in regions of the country particularly vulnerable to climate change impacts.”
Triple-I argues that these objectives can be met by using the information insurers already are required to report, as well as other publicly available data. It also suggests that “assessing the potential” for disruptions might not be as productive an endeavor as working to prevent such disruptions by collaborating with the insurance industry to reduce their likelihood.
“There is no dearth of information to help FIO and policymakers address the conditions contributing to climate risk and drive the behavioral changes needed in the near, intermediate, and long term,” Triple-I wrote, reminding FIO that catastrophe-modeling firms prepare their industry exposure data bases from public sources, not insurer data calls. Similarly, abundant public data exists regarding the needs of vulnerable populations and the risks to which they are subject. “What is needed is to build on existing efforts and draw on the voluminous data and analysis already extant to target problem areas that are well understood.”
Insurance availability and affordability are inextricably linked to reducing damage and losses. The best way to keep insurance available and affordable is to reduce the amounts insurers have to pay in claims.
“Less damage leads to reduced claims, helping to preserve policyholder surplus and enabling insurers to limit premium rate increases over time,” Triple-I wrote.
“While we recognize the Treasury’s desire to better understand the impact of climate risk and weather-related exposures on the availability and affordability of the homeowners’ insurance market,” NAIC wrote, “we are disappointed and concerned that Treasury chose not to engage insurance regulators in a credible exercise to identify data elements gathered by either the industry or the regulatory community.”
NAIC contrasted Treasury’s approach to prior data-gathering efforts, such as after Superstorm Sandy, when Treasury initially asked the states for a wide-ranging data set but ultimately agreed to a more focused call. In the current case, NAIC wrote, “The unilateral process Treasury employed thus far is a missed opportunity to work collaboratively with regulators on an issue we have both identified as a priority.”
Insurers are responsibly promoting a more sustainable and resilient environment and economy. The most pressing need now is to help communities adapt and make sure they are adequately insured against events that can’t be prevented. The NAIC, as well as residual-market administrators in Florida, Louisiana, and California – states where the impacts of climate risk already are playing out – can provide relevant data and insights and help FIO translate them into actionable policy proposals.
Triple-I agrees with the NAIC that FIO should use publicly available data and work with state insurance regulators, who fully understand the risks, market and operational dynamics, and policy structures. Such an approach would spare FIO and insurers unnecessary work and the public unnecessary confusion.
Among the themes running through Triple-I’s 2022 Joint Industry Forum (JIF), a dominant one was the growing importance of predicting and preventing losses, versus the property/casualty insurance industry’s traditional emphasis on transferring risk from policyholders to insurers and assessing and paying claims when they arise.
Increasing severity of weather- and climate-related events, compounded by rising numbers of people moving into the most vulnerable geographies; cyber criminals shifting their targets and evolving their strategies, often protected by nation-state hosts; and legal-system abuse, pushing up litigation costs in ways that ultimately hurt all policyholders are among the factors contributing to the need for this shift in focus.
Against this backdrop, insurers still must price coverage and appropriately reserve for these costly risks while ensuring that their business practices remain equitable and insurance is available and affordable for all who need it. This means financial and economic issues and diversity, equity, and inclusion considerations are always part of the conversation.
Predicting and preventing requires strategy, effective use of data and technology, and partnerships across diverse disciplines and stakeholder groups – along with a focus on educating consumers, policymakers, media, academia, businesses, communities, and others about the complexities of risk and risk management.
Triple-I plays this educational role every day, through its research and media outreach and support; continuous contact with its members, regulators, content partners, and data providers; and participation in and sponsorship of events like JIF.
State Farm CEO Michael Tipsord discussed a wide range of insurance industry issues and trends with Triple-I CEO Sean Kevelighan at Triple-I’s 2022 Joint Industry Forum. A unifying thread throughout their conversation was the continued relevance of State Farm’s mutual ownership structure and “captive” agent network in today’s risk and operational environment.
State Farm is unusual among large U.S. insurers in that it has retained its mutual structure and continues to rely primarily on a network of more than 19,000 captive agents to sell its products. Founded in 1922 by a farmer who believed farmers shouldn’t have to pay the same auto insurance rates as city dwellers, State Farm has grown to become the largest home and auto insurer in the United States, in terms of market share and premiums written.
The mutual structure – in which policyholders own the insurer – was popular at the time, but in recent decades many mutuals have converted to stockholder-owned companies to access capital needed to grow more quickly.
“This mutual structure permeates everything we do, every decision we make,” Tipsord said. “My focus is always on what’s in the best long-term interests of that State Farm customer group as a whole.”
Mutuality “gives us the flexibility to make choices that our publicly traded counterparts may not think they have,” he explained. “That mutual structure has to be combined with financial strength. Annual operating results are just a means to that end. We’re not subject to the same pressures” as insurers that have to answer to external shareholders.
Similarly, State Farm’s captive agent workforce – located in all but two U.S. states – “are in their communities, day in and day out. They’re in a position to understand their customers because they’re living with their customers.”
Tipsord noted that 95 percent of State Farm’s business comes through its agents, and “we are investing back” into that workforce.
When the pandemic hit and lockdowns commenced, Tipsord said, “Our agents and team members proactively reached out to their customers – not to sell anything, just to check in, to see if they were okay. To see if they needed any help. There are hundreds of stories of agents identifying elderly who needed help buying groceries. It always comes back to our mission of helping people.”
But the success of State Farm’s mutual model and captive agency force doesn’t absolve the company from the need to evolve with changing conditions. State Farm is investing heavily in “digitally enabling our agents,” Tipsord said, “and our agents and their teams readily adapt” to their customers’ expectations.
Part of that digitization effort was State Farm’s recent investment of $1.2 billion in ADT for a 15 percent stake in the home-security company.
“What was most important in that transaction was the relationship that it created among State Farm, ADT, and Google,” Tipsord said. “This is what I call the $300 million opportunity fund. Let’s dedicate resource so we can look for ways in which you bring these three organizations that have very different skill sets together to help our customers.”
Insurers are expected to post an underwriting loss in 2022, following four years of modest underwriting profits, according to a panel at the Triple-I’s Joint Industry Forum.
The panel was introduced by Paul Lavelle, head of U.S. national accounts for Zurich North America, who noted that the insurance landscape has dramatically changed over the past year.
“The biggest concerns for the world economy are rapid inflation, debt crisis, and the cost of living,” Lavelle said in his opening remarks. “I think that’s why, we as an industry, need to pull this together, and deal with all the variables.”
The panel consisted of Dr. Michel Léonard, Triple-I chief economist and data scientist; Dale Porfilio, Triple-I chief insurance officer; and Jason Kurtz, principal and consulting actuary for actuarial consultant Milliman Inc.
“Inflation overall has gone up and replacement costs have come down,” Léonard said in his initial remarks. “Growth has been challenging because of federal reserve policy that has brought the economy to a halt. Most growth has been disappearing in homeowners, a bit on the commercial real estate side, and on the auto side.”
Porfilio said the rise in loss trends across the insurance industry reveals an underwriting loss, with a projected combined ratio of approximately 105 in 2022. The combined ratio represents the difference between claims and expenses paid and premiums collected by insurers. A combined ratio below 100 represents an underwriting profit, and a ratio above 100 represents a loss.
The 2022 underwriting loss comes after a small underwriting profit from 2018 through 2021, at 99. However, underwriting results are expected to improve as the industry moves forward.
“The results don’t look like the prior years,” Porfilio said. “The core underwriting fundamentals are concerning. However, after a poor result in 2022, we do expect some improvement in 2023 and 2024.”
“In the aggregate, commercial lines are relatively outperforming personal lines,” said Kurtz. “That was the case in 2021 and we expect that to be the case in 2022 and through our forecast period of 2024.”
This includes workers compensation, which is closing in on eight years of underwriting profits, according to Kurtz.
On the personal auto line, gains from 2020 have been changed to the biggest losses in two decades.
“Personal auto is very sensitive to supply and demand,” Léonard said. “In the last 24 months, there’s been a historic swing in prices, and particularly the used auto side. It’s all about supply and demand. Those prices increased 30 to 40 percent year-over-year. Recently, though, prices have come down a bit.”
“The industry lived through high profitability in 2020 due to less drivers,” Porfilio added. “Fourteen billion was returned to customers that year.”
However, due to increased driving and reckless driving, the loss ratios have gone up.
The combined ratio in 2021 stood at 101, and in excess of 108 in 2022, according to Porfilio. Still, loss trends are expected to return to normal in 2023 and 2024.
Interest rates have also affected homeowners lines.
“The federal policies have been punishing growth,” Léonard said.
“Underlying loss pressure and Hurricane Ian have created challenging results,” Porfilio added.
However, the hard market has caused growth of 10 percent in 2022, partially due to exposure agreements, as well as rate increases.
The combined ratio for 2022 is expected to be around 115, dropping to approximately 106 in 2023, before an expected decrease to around 104 percent in 2024.
On the commercial auto side, the panelists predict an underwriting profit with a combined ratio of 99 in 2021, but there was a four-point loss in 2022. This is expected to improve in 2023, with a forecast ratio of 102, and 101 in 2024.
On the commercial property lines, the markets are facing shortages of steel, glass, and copper, according to Leonard, with labor challenges contributing to low-to-mid-double-digit percentage time increases to some tasks.
“One of the most important factors in this is labor. It’s very unlikely that labor will go back to where it was,” Léonard said. “We’ve estimated that it will take 30 percent longer for repairs, rebuild, and construction, and five percent in terms of cost.”
However, Kurtz said that the net combined ratio for commercial property markets is projected to be approximately 99.1 in 2022, a small underwriting profit in spite of losses tied to Hurricane Ian. For 2023, the combined ratio is expected to be roughly 94 and 92 in 2024.
“We are anticipating further rate increases and further premium growth,” Kurtz added.
Indeed, insurers continue to adapt to these new challenges. Although 2022 is predicted to result in small losses, the industry continues to evolve.
As Lavelle said in his introduction, “Insurance companies are no longer able just to assess the risk, collect the premium, and pay the loss. We’re being looked at to come up with answers.”
The property/casualty insurance industry’s underwriting profitability is forecast to have worsened in 2022 relative to 2021, driven by losses from Hurricane Ian and significant deterioration in the personal auto line, making it the worst year for the P&C industry since 2011, actuaries at Triple-I and Milliman – an independent risk-management, benefits, and technology firm – reported today.
The quarterly report, presented at a members-only webinar, also found that workers compensation continued its multi-year profitability trend and general liability is forecast to earn a small underwriting profit, with premium growth remaining strong due to the hard market.
The industry’s combined ratio – a measure of underwriting profitability in which a number below 100 represents a profit and one above 100 represents a loss – worsened by 6.1 points, from 99.5 in 2021 to 105.6 in 2022.
Rising rates, geopolitical risk
Dr. Michel Léonard, Triple-I’s chief economist and data scientist, discussed key macroeconomic trends impacting the property/casualty industry, including inflation, replacement costs, geopolitical risk, and cyber.
“Rising interest rates will have a chilling impact on underlying growth across P&C lines, from residential to commercial property and auto,” he said, adding that 2023 “is gearing up to be yet another year of historical volatility. Stubbornly high inflation, the threat of a recession, and increases in unemployment top our list of economic risks.”
Léonard also noted the scale of geopolitical risk, saying, “The threat of a large cyber-attack on U.S. infrastructure tops our list of tail risks.”
“Tail risk” refers to the chance of a loss occurring due to a rare event, as predicted by a probability distribution.
“Russia’s weaponization of gas supplies to Europe, China’s ongoing military exercises threatening Taiwan, and the potential for electoral disturbances in the U.S. contribute to making geopolitical risk the highest in decades,” Léonard said.
Cats drive underwriting losses
Dale Porfilio, Triple-I’s Chief insurance officer, discussed the overall P&C industry underwriting projections and exposure growth, noting that the 2022 catastrophe losses are forecast to be comparable to 2017.
“We forecast premium growth to increase 8.8 percent in 2022 and 8.9 percent in 2023, primarily due to hard market conditions,” Porfilio said. “We estimate catastrophe losses from Hurricane Ian will push up the homeowners combined ratio to 115.4 percent, the highest since 2011.”
For commercial multi-peril line, Jason B. Kurtz, a principal and consulting actuary at Milliman – a global consulting and actuarial firm – said another year of underwriting losses is likely.
“Underwriting losses are expected to continue as more rate increases are needed to offset catastrophe and economic and social inflation loss pressures,” Kurtz said.
For the commercial property line, Kurtz noted that Hurricane Ian will threaten underwriting profitability, but that the line has benefited from significant premium growth. “We forecast premium growth of 14.5 percent in 2022, following 17.4 percent growth in 2021.”
Regarding commercial auto, Dave Moore, president of Moore Actuarial Consulting, said the 2022 combined ratio for that line is nearly 6 points worse than 2021.
“We are forecasting underwriting losses for 2023 through 2024 due to inflation, both social inflation and economic inflation, loss pressure, and prior year adverse loss development,” he said. “Premium growth is expected to remain elevated due to hard market conditions.”
“After a sharp drop to 47.5 percent in 2Q 2020, quarterly direct loss ratios resumed their upward trend, averaging 74.2 percent over the most recent four quarters,” Porfilio said. “Low miles driven in the first year of the pandemic contributed to favorable loss experience.”
Since then, Porfilio continued, “Miles driven have largely returned to 2019 levels, but with riskier driving behaviors, such as distracted driving, and higher inflation. Supply-chain disruption, labor shortages, and costlier replacements parts are all contributing to current and future loss pressures.”
Overall, loss pressures from inflation, risky driving behavior, increasing catastrophe losses, and geopolitical turmoil are leading to the need for rate increases to restore underwriting profits.
Insurance fraud costs the U.S. $308.6 billion a year, according to recent research by the Coalition Against Insurance Fraud (CAIF). And, while staffing within insurers’ Special Investigation Units (SIU) is a pain point, CAIF found that use of anti-fraud technology is on the rise.
CAIF notes that hardest-hit insurance lines are:
Life insurance, at $74.7 billion annually;
Medicare and Medicaid, at $68.7 billion; and
Property and casualty, $45 billion.
“There is a huge and monumental impact that insurance fraud causes to American citizens, American families, and to our economy every single year,” said Matthew Smith, the coalition’s executive director.
Another recent CAIF study looked at SIUs and insurers’ response to fraud. The study found that SIU staff grew at 1.4 percent from 2021 to 2022, slower than the 2.5 percent growth rates from two previous studies addressing this issue. Staffing and talent are among the top concerns of anti-fraud leaders CAIF surveyed.
However, an additional CAIF study found that anti-fraud technology is increasingly being used—a positive sign in the fight against these crimes. Among the key findings of that report is that 80 percent of respondents use predictive modeling to detect fraud, up from 55 percent in 2018.
Insurance fraud is not a victimless crime. According to the FBI, the average American family spends an extra $400 to $700 on premiums every year because of fraud. Most of these costs are derived from common frauds, including inflating actual claims; misrepresenting facts on an insurance application; submitting claims for injuries or damage that never occurred; and staging accidents.
To further combat insurance fraud, there are ways to file complaints, including contacting your state’s fraud bureau; contacting your insurer to see if a fraud system is in place; using the National Insurance Crime Bureau (NICB) “Report Fraud” button; and reporting it to a local FBI branch.
“Insurance fraud is the crime we all pay for,” CAIF’s Smith added. “Ultimately, it’s American policyholders and consumers that pay the high cost of insurance fraud.”
Nearly all the largest U.S. personal auto insurers reported poor financial results in the second quarter of 2022, according to an S&P Global Market Intelligence analysis. Several issues contributed to this trend and are putting upward pressure on premium rates as insurers’ loss ratios grow. The loss ratio is the percentage of each premium dollar an insurer spends on claims.
The factors driving negative auto insurer economic performance include:
Rising insurer losses due to increasing accident frequency and severity;
More fatalities and injuries on the road, leading to increased attorney involvement in claims;
Continuing supply-chain issues, leading to rising costs for autos, auto replacement parts, and labor; and
More costly auto repairs due to safer, more technologically sophisticated vehicles.
“The private auto business, besieged by the impact of inflation on vehicle repair and replacement costs, swung to a combined ratio of nearly 101.5 percent in 2021 from 92.5 percent in 2020 and 98.8 percent in 2019,” S&P reports. Combined ratio represents the difference between claims and expenses paid and premiums collected by insurers. A combined ratio below 100 represents an underwriting profit, and a ratio above 100 represents a loss. “After the private auto business nearly brought the industry to the brink of breakeven in 2021, we project that it will push the overall combined ratio into the red in 2022.”
At the beginning of the pandemic in 2020, auto insurers – anticipating fewer accidents amid the economic lockdown – gave back approximately $14 billion to policyholders in the form of cash refunds and account credits. While insurers’ personal auto loss ratios fell briefly and sharply in 2020, they have since climbed steadily to exceed pre-pandemic levels.
With more drivers returning to the road in 2022, this loss trend is expected to continue. The severity of the post-pandemic riskiness of U.S. highways is illustrated by the fact that traffic deaths – after decades of decline – have increased in the past several years due to more drivers speeding, driving under the influence, or not wearing seat belts during the pandemic. In 2021, U.S. traffic fatalities reached a 16-year high, with nearly 43,000 deaths.
“When everyday life came to a halt in March 2020, risky behaviors skyrocketed and traffic fatalities spiked,” said National Highway Traffic Safety Administration (NHTSA) administrator Steven Cliff. “We’d hoped these trends were limited to 2020, but, sadly, they aren’t.”
This year, NHTSA estimates, 9,560 people died in motor vehicle crashes between January and March, up 7 percent from the same period in 2021, making it the deadliest first quarter since 2002.
Auto insurers also must contend with cost factors beyond what is occurring on the nation’s roadways. A recent auto insurance affordability study published by the Insurance Research Council (IRC) highlights the role of attorney involvement in driving up insurer expenses – and, ultimately, policyholder premiums – in the states where auto coverage is least affordable. As attorney involvement tends to be more prevalent in claims cases involving bodily injury, the NHTSA numbers are important for understanding upward pressure on auto insurance premium rates.
The IRC – like Triple-I, an affiliate of The Institutes – also points out that consumer spending on auto insurance has grown more slowly over the past 30 years than median household income, at least through year-end 2019 (see chart below).
In a society as dependent as ours is on access to transportation, availability and affordability of auto insurance are important components of overall consumer expenses. Triple-I will continue to report on trends in this important line.
