Tag Archives: COVID-19 auto

Auto Insurance, Insurers and the Economy

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

Leave a comment

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, Legal Environment

Nevada Class Actions Against Auto Insurers Risk Hurting Policyholders

Leave a comment

Class action lawsuits filed in Nevada last month against 10 auto insurers are more likely to hurt policyholders than help them.

The suits contend that discounts, rebates, and policyholder dividends provided in 2020 – amounting to about $14 billion nationally – were not “meaningful” and that the rates charged violate state law against excessive premiums. The $14 billion figure does not include the more than $280 million in philanthropic contributions the industry has also made during COVID-19 to support communities.

The fact is, auto insurance premium rates fell nationally in 2020 for the first time in a decade. Insurers’ net income after taxes fell 26.1 percent through the third quarter of 2020, compared with the same quarter the previous year. A major factor was the pandemic-related discounts granted in 2020.

“The rate is lower because people are driving less,” said Triple-I chief actuary James Lynch, noting that during a lockdown period in the spring driving was down as much as 50 percent. Fewer cars on the road should lead to fewer accidents, and this expectation is what led insurers to proactively provide discounts and other policyholder benefits during the pandemic. Many auto insurers have built these discounts into premium rates for 2021, Lynch said.

Accidents down, fatalities up

Accidents did decline in 2020; unfortunately, traffic fatalities and claims increased. According to the National Highway Traffic Safety Administration (NHTSA), fatalities rose 4.6 percent in the first nine months of 2020, despite overall vehicle miles traveled having decreased. Fatalities in the third quarter of 2020 were 13 percent higher than in the same period of 2019 – the largest such increase in more than a decade. This suggests that driver behavior deteriorated rapidly and significantly during the pandemic.

The 2020 premium reduction would have even been larger, Lynch said, “if people had slowed down.”

Claims rising faster than premiums

Even before COVID-19, auto damage claims were rising faster than general inflation, and auto insurance premium increases trailed inflation. Fatalities had been declining as cars became safer – but safety technology is expensive, making repairs more costly and driving up the size of policyholder claims.

The 2020 trend of increasing fatalities could worsen as traffic volume returns to pre-COVID levels. Data show that many motorists who substantially increased their driving speed when traffic was 50 percent below normal have not slowed down as traffic increased, Lynch said.

“The concern is that frequency patterns will return to the norm, but fast driving will keep claim severity high, putting upward pressure on rates,” Lynch said.

The salient point is this: Insurers have kept their promises to pay claims, given $14 billion back to policyholders, and generously supported communities through philanthropy – even as rising accident severity during the pandemic dented their net incomes. Defending themselves against frivolous litigation will only add to their expenses, and lower premiums are unlikely to be the result.

Auto Insurance, Insurance Industry

Auto insurance rates decline across the U.S.

Leave a comment

Auto insurance rates declined in 2020 for the first time in a decade, according to a recent survey by ValuePenguin.com. The survey results anticipate a 1.7 percent decline nationally.

A major factor in the decline are the pandemic-related discounts granted by insurers in 2020. These discounts have been valued at $14 billion, according to Triple-I estimates. Triple-I Chief Actuary James Lynch reported that many auto insurers are building these discounts into rates for 2021 and that driving declined by as much as 50 percent during spring lockdowns.

The estimate of just how much rates are declining depends on the metrics you use. The Consumer Price Index (CPI) report for December 2020 indicates that auto insurance rates declined by 4.8 percent nationwide compared with the same month last year. By contrast, the CPI showed the cost of new vehicles rising by 2 percent in December and by 0.5 percent for the full year 2020.

A comprehensive July 2018 assessment of the Missouri auto insurance market by the state’s Department of Insurance discovered even larger declines. It found that, when adjusted for inflation, the typical Missouri driver has seen a 17 percent decrease in auto insurance premiums since 1998.

Auto Insurance, Highway Safety

Will PandemicDriving Trends PersistAfter COVID-19 Passes?

Leave a comment

More people died in New York City automobile accidents in 2020 than in 2019, despite greatly reduced driving as a result of the COVID-19 pandemic and subsequent economic slowdown. The local trend is consistent with broader ones recently referenced by Triple-I senior vice president and chief actuary James Lynch.

As of this morning’s reporting on WNYC, 227 people had died in car-related accidents this year in New York City, compared with 203 by this time last year. This increase appears to be due to more speeding and reckless driving, as documented by a doubling of speeding tickets in 2020, from more than 2 million to 4 million.

Similar trends are reported in other states. In Minnesota, 372 fatal accidents have been reported, compared with 346 this time last year.  Wisconsin reported a 7.4 percent increase in auto fatalities.

During the first six months of 2020, Colorado’s traffic deaths rose just by just 1 percent from the same period in 2019 – but the fatality rate per vehicle mile traveled rose by 20 percent.

Nationally, Triple-I’s Lynch said, “mileage driven this year is down 12 percent, but traffic fatalities are up 4 percent. The concern is that frequency patterns will return to the norm, but fast driving will keep claim severity high, putting upward pressure on rates.”

WNYC’s Steven Nessen reported some good news with respect to pedestrian deaths in New York, which are down to 93 from 108 this time last year. 

“If the city can keep it up, this may end up being the safest year for pedestrian deaths since Mayor DeBlasio took office,” Nessen said.

Nessen also noted that deaths of bicyclists in New York City were little changed in 2020 – notable because bicycle use has increased dramatically this year – and that reckless drivers “seem mostly to be killing themselves by hitting medians or trees.”

“Where we see a big jump in numbers is in motorcycle deaths,” he continued. “Those numbers nearly doubled this year, to forty-seven.”

This isn’t surprising, given that motorcycle fatalities – per vehicle miles traveled – occur nearly 27 times more frequently than passenger car occupant fatalities in crashes.

Auto Insurance, Highway Safety

The Dangers of Driving During the Holiday Season

Leave a comment

By Max Dorfman, Research Writer, Triple-I

As the holiday season continues to ramp up, it’s important to remember that this time of year is particularly risky for driving. That’s why December has been officially designated Drugged and Drunk Driving Prevention month.

During the Christmas holidays, alcohol-impaired fatalities in 2018 comprised 37 percent of total traffic fatalities, compared to 29 percent total for all times of the year. In total, there are more than 750 fatalities in December due to drunk driving, according to the U.S. Department of Transportation.

According to National Safety Council, the average number of traffic deaths during New Year’s Day over the last five holidays is almost 68 percent greater than the average number of traffic deaths during nonholiday periods, with 175 deaths compared to the usual 104 deaths.

Drunk driving is not the only reason people get into dangerous accidents during the holidays. Extreme weather can also contribute to risks during the blustery winter season, including snow, black ice, high winds and hail. Fatigued and stressed driving is also an issue during the holidays, with individuals potentially traveling further than they usually do. And in 2020, anxiety related to the coronavirus pandemic may make these stress-related issues worse.

With this in mind, it’s important to remember some tips to remain safe while driving during the holiday season, including:

  • Drive defensively by taking precautions while driving, paying close attention to the cars around you. Even if you’re not drinking or driving recklessly, others may be.
  • Do not drive if you are drinking, making sure you have safe, sober transportation, regardless of how far you’re traveling.
  • Plan for inclement weather by checking weather forecasts and changing your plans if necessary.

Remember: the holidays can be a busy and stressful time for people, but that’s no reason to let your guard down while driving.

For more safe driving tips check out this Triple-I video.

Auto Insurance, Highway Safety, Technology

Usage-Based Insurance Gets Confidence Boost During COVID-19 Pandemic

1 Comment

Drivers seem to have become more comfortable in the past year with the idea of giving up their data to help insurers more accurately price their coverage.

In May 2019, mobility data and analytics firm Arity surveyed 875 licensed drivers over the age of 18 to find out how comfortable they would be having their insurance premiums adjusted based on typical telematics variables. Between 30 and 40 percent said they would be either very or extremely comfortable sharing this data.

In May of this year, they ran the survey again with more than 1,000 licensed drivers.

“This time,” Arity says, “about 50 percent of drivers were comfortable with having their insurance priced based on the number of miles they drive, where they drive, and what time of day they drive, as well as distracted driving and speeding.”

This is a year-over-year increase of more than 12%. What happened?

The answer begins with a “C” and ends with a “19.”

Money talks…

Telematic information was part of the reason insurers could return money quickly to their customers during the COVID-19 pandemic, and that fact seems to have brought positive attention to usage-based insurance (UBI). Telematics combines GPS with on-board diagnostics to record and map where a car is, its condition, and how fast it’s traveling. This technology is integral to UBI, in which insurers are able to adjust premiums based on driving behavior.

During the first wave of the pandemic, Arity data showed considerable changes in how and when people were driving when they began to self-quarantine in March 2020. Driving across the U.S. dropped significantly, and this data helped spark the trend of insurance carriers offering refunds to their policyholders.

“These paybacks were widely covered by the media, including Forbes, so consumers became aware of the potential savings, even if their own insurer didn’t offer a discount,” Arity reports.

“Private-passenger auto insurers returned around $14 billion in premiums this year to the nation’s drivers as miles driven dropped dramatically in the pandemic’s early months,” says James Lynch, Triple-I’s chief actuary. “This resulted in a five percent reduction in the cost of auto insurance for the typical driver in 2020, as compared to 2019.” 

Auto Insurance, Insurance Industry

COVID-19: Impact on Auto Insurance

Leave a comment

Triple-I’s chief actuary, James Lynch, gave this talk on the changes that COVID-19 is bringing to the automobile insurance business, at the American Academy of Actuaries Annual Meeting last week.

“Thanks for inviting me to be part of such an august panel. I wanted to spend a few moments talking about what Insurance Information Institute research indicates are significant changes happening in the sector right now and what may lie ahead.

Not surprisingly, the pandemic has had an enormous influence. Triple-I estimates that insurers will return $14 billion to customers because of the dramatic decrease in driving. Even with that, most insurers have shown improved results.

A good rule of thumb is that insurers returned about 15 percent of second quarter premiums. Fast Track data show that loss costs in the second quarter were between 7 and 40 percent lower than a year earlier, depending on coverage.

A closer look at the numbers show what might be a disturbing long-term trend. Frequency was way down in every coverage, but some coverages showed disturbing spikes in claim severity. Property damage frequency was down more than 30 percent from a year earlier, but severity was up almost 20 percent. This was likely caused by faster driving.  

Since the spring lockdowns have eased, customers are driving more again, but they still haven’t returned to the levels of a year ago. Right now people are driving about 12 percent fewer miles than they did a year ago.

However, there is ample evidence that drivers are still going faster than they did, particularly at rush hours. That’s why mileage driven this year is down 12 percent, but traffic fatalities are up 4 percent. The concern is that frequency patterns will return to the norm, but fast driving will keep claim severity high, putting upward pressure on rates.

There’s good news for insurers though. Telematic information was an important reason insurers could return money quickly to their customers, and that fact seems to have brought positive attention to usage-based insurance. Research by Arity shows that 58 percent of drivers surveyed this year are comfortable with insurers monitoring distracted driving to price insurance, up from 39 percent a year ago. There were similar increases for monitoring miles driven, speed and where a person drives.

There are lots of other questions about where the industry is going, and I guess I’ll step back and let us talk about those as a group.”

Auto Insurance

Auto Insurance Claims Satisfaction at a Record High During Pandemic

Leave a comment

Auto insurers used the decline in auto damage claims during the COVID-19 pandemic as an opportunity to refine their claims processes, and customers have noticed.

According to the J.D. Power 2020 U.S. Auto Claims Satisfaction Study, the customer services improvements have led to  record-high  customer satisfaction. These improvements include ensuring that representatives are always immediately available; completing work when promised; and providing multiple services at first notice of loss.

“It is extremely rewarding to see the insurance industry’s exceptional work being recognized by its most important critic: the American consumer,” said Sean Kevelighan, CEO, Triple-I.  “During the pandemic, the nation’s auto insurers have worked non-stop to provide relief and economic security to policyholders who had to file a claim.  This is in keeping with their role as society’s financial first responders,” he said in a Triple-I news release.

Key findings of the J.D. Power study include:

  • Record-high customer satisfaction with auto claims: Overall satisfaction with the auto insurance claims process increases to a record-high 872 (on a 1,000-point scale), up four points from 2019. This is the third consecutive year of improvement in auto claims satisfaction, which has been driven by increases in performance across nearly every factor measured in the study: claim servicing; estimation process; repair process; rental experience; and settlement. The only factor that has not improved year over year is first notice of loss, which remains flat from 2019.
     
  • Cycle time improves as claims volume slows: Auto insurers have upped their game during the pandemic, taking advantage of the drop in frequency to increase the speed of processing for claimants. Overall cycle time for claimants with reparable vehicles has improved to just 10.3 days during the pandemic, down from the pre-virus average of 12.6 days.
     
  • Quantifying the COVID-19 boost: This year’s study was fielded in four waves from November 2019 through September 2020, giving J.D. Power the ability to compare pre-virus levels of customer satisfaction with those experienced during the pandemic. Notably, the number of claimants who say they “definitely will” renew with their existing insurer is 76% during the pandemic versus 72% pre-virus. 
  • Use of direct repair program (DRP) shops improves satisfaction: The industry’s growing use of directly affiliated repair shops is paying off with a significantly higher overall satisfaction score (888) than for independent repair shops (844). This is driven by quicker cycle times among DRP shops and regular updates on progress.

“The sharp decline in claims volume during the pandemic has served as a test case for the industry in how to make improvements in service delivery that translates directly to increased satisfaction and increased intent to renew,” said Tom Super, head of property and casualty insurance intelligence at J.D. Power. “This is important because it demonstrates that efforts to improve claimant service delivery translates directly to improved business outcomes. The challenge now, of course, will be maintaining that high level of service as claims volumes start to normalize.”

Given the reduced mileage on U.S. roadways this year, U.S. auto insurers are also returning over $14 billion to their customers nationwide in response to reduced driving during the pandemic, according to a Triple-I estimate.

Auto Insurance

Policyholder Dividends Soar as Auto Insurers Respond to Pandemic

Leave a comment

Policyholder dividends have more than tripled so far this year, due largely to approximately $14 billion auto insurers have returned to policyholders in response to reduced driving and fewer accident claims related to the COVID-19 pandemic.

According to National Association of Insurance Commissioners (NAIC) data from Standard & Poor’s Global Market Intelligence, insurers issued $4.8 billion through the second quarter of 2020, almost $3.4 billion more than the same period a year ago. The bulk of that, $3.3 billion, is a result of pandemic-related driving patterns.

Insurers in the first half also booked $4.7 billion in credits through lower rates, and another $1.6 billion was booked as an underwriting expense, according to a Triple-I analysis of industry results.

In the second half of the year, Triple-I projects, insurers will return to customers another $338 million in dividends. Rate decreases of $4.1 billion will make up the remainder of the $14 billion in givebacks.

State Farm, the country’s largest auto insurer by premiums written, in April announced a $2 billion dividend to its auto insurance customers, averaging a 25 percent credit on these customers’ premiums through May 31. Combined with the premium credit and an 11 percent reduction in premium rates, the company said, these initiatives will save customers $4.2 billion through the end of 2020.

USAA, through a series of three dividend announcements, has returned $1.07 billion to auto policyholders and said it also is adjusting its rates.

On top of these, the industry has provided approximately $280 million in charitable giving specifically related to the pandemic.

Auto Insurance, Highway Safety

Based on gas consumption, we’re nearly back to driving at pre-pandemic/recession levels

1 Comment

By Dr. Steven Weisbart, Chief Economist, Insurance Information Institute

The U.S. Energy Information Administration (EIA) publishes extensive data on petroleum production, refining and supplies to users, with some data provided on a weekly basis. Gasoline supplied to retailers is not quite the same as gasoline consumed but it is close. And gasoline consumed is not exactly the same as miles driven but it is close.  Consequently these data can indicate how much people are driving, sooner than we get data on the frequency and severity of collisions. Still, one benefit of tracking these data is that they are published in a timely way.

As a baseline, consider gasoline supplied in the first 12 weeks of 2020, compared to the comparable weeks in 2019 (Figure 1). Although this comparison can be affected by changes in prices from year to year as well as changes in weather (and possibly other differences between the two periods), we can assume that these differences are small and do not obscure longer-term trends.

The graph shows some week-to-week variation, but basically the same—or maybe a little less—gas supplied in 2020 vs. 2019.

Then the pandemic—and the start of the recession caused by fighting it—happened. Driving was sharply curtailed, and auto insurers instituted programs for refunding premiums to reflect this change. Figure 2 adds to Figure 1 the percentage change in year-over-year supplies of gas for the rest of March and all of April 2020.

But in May some states began relaxing various restrictions, and driving began to return to near-pre-pandemic/recession levels, as Figure 3 shows.

At this point there is no way to know what caused this spike in gas usage, but some speculate that any or all of the following could be responsible:

•        States are moving to more permissive stages of lockdown, resulting in more travel, especially to beaches and other outdoor activities

•        People who once took public transportation are now choosing to drive, thereby lessening exposure to the virus that might result from travel on mass transit

•        Warmer weather months are traditionally a time for more driving

•        The price of gas continues to be unusually low, making driving less burdensome than the prior year.