Category Archives: Auto Trends

Ridin’ with the Waymos

In Phoenix last week, I did what insurance folks do in Phoenix. I hunted down an autonomous vehicle. I even took a picture:

The ‘W’ on the rear window stands for Waymo, the Google/Alphabet division that is probably the leader in developing driverless technologies.

Depending on which insurance thought leader you talk to, driverless vehicles will revolutionize our business or destroy it. I’m a skeptic: We will have driverless cars; everyone will use them, but not for another 20-plus years; and they will not be the death of auto insurance.

Google’s not-so-secret testing facility is just south of Phoenix, in Chandler. I couldn’t find it on Google Maps (it’s a secret, surprise surprise), but I could find Chandler City Hall. In an adjoining lot sat three or four bubble-headed Waymos. They are eerily identical Chrysler Pacifica minivans. Each is white. Each has the same bubble brain on the same spot of the hood and the same aqua-and-sea-green W logo. And, though they are white, the desert sun reveals no hint of grime.

I parked across the street and began my stake-out. Continue reading Ridin’ with the Waymos

Auto Results: Ups and Downs

While the spike in auto accident rates appears to have eased in the past year or so, increases in claim size continue to present challenges. The folks at Gen Re weigh in:

Industry loss ratios suggest that many carriers are still playing catch-up. With ultimate liability loss ratios above 70% and combined ratios several points above 100%, the industry still has work to do.

Here at I.I.I. we note that for the first half of the year, liability loss ratios have fallen 3 percentage points for personal auto, to 64 percent, but risen 4 points for commercial auto, to 70 percent.  (This comes from NAIC data sourced from S&P Global Market Intelligence. Q3 data isn’t out yet.)

Physical damage loss ratios have fallen 5 percentage points, to 60 percent. Physdam results don’t get split between commercial and personal auto on financial statements until year-end, but the improvement is probably weighted to the personal auto side, since personal physdam is more than 90 percent of total volume.

So the landscape seems to be improving for personal auto but not so much for commercial . . .

. . . Which explains why the Council of Insurance Agents and Brokers reports that commercial auto rates are 7 percent higher than a year ago. It’s the 29th consecutive quarter (more than seven years) of rate increases.

Gen Re spotlights the following trends, most of which transcend personal and commercial lines:

  • Economic Recovery and Miles Driven – The improvement in the unemployment rate puts more cars and a worse mix of drivers on the road.

  • Driver Shortages – The trucking industry estimates a shortage of over 50,000 drivers by year-end, which leads to reliance on inexperienced drivers entering the industry.

  • Distracted Driving – Cognitive distractions and smartphone addiction have contributed to higher accident severity, with statistics often being underreported.

  • Drugged Driving/Marijuana – Studies from Washington, Colorado and Oregon find that accident frequency increased in the years after marijuana was legalized, and more states have since enacted similar legislation.

  • Escalating Repair Costs – Advances in vehicle safety systems, including cameras and sensors, have grown repair costs significantly.

  • Litigation/Jurisdiction – An active plaintiff’s bar, restrictive medical records laws, cost shifting, and litigation funding can drive up settlement values substantially.

We’ve seen similar trends at I.I.I. and highlighted them in this presentation last March in Chicago. The key graphic from that presentation is atop this article. We add speed to the mix, because as cars get more powerful, people drive faster.

 

Is relief in sight for personal and commercial auto claims?

By Steven Weisbart, Chief Economist, Insurance Information Institute

 

 

About three years ago the Insurance Information Institute noticed a strong correlation between the number of people employed and the amount of driving done, as measured by the U.S. Department of Transportation’s monthly survey of vehicle-miles traveled. Of course, it is reasonable to expect that as more people hold jobs, most would drive to work. And as those who had been unemployed gained incomes, they would also logically be likely to drive more for leisure.

Further, we noticed another strong correlation between vehicle-miles traveled, on the one hand, and the collision paid claim frequency rate (as captured by Fast Track Monitoring Service), on the other—which is also a logical relationship. This, in addition to other factors, such as an increase in distracted driving, higher speed limits on some roads and other causes, helped explain the unusual spike in the frequency of auto insurance claims in 2015 and again in 2016.

However, lately these relationships appear to be weakening. For example, the year-over-year increase in vehicle-miles traveled was more than 2 percent in 2015 and 2016, and despite continued steady growth in the number of people employed, was 1.5 percent in the first half of 2017, just under 1 percent in the second half of 2017, and under 0.5 percent in the first five months of 2018 (the latest data available).

It’s possible that the rise in the price of gasoline is affecting vehicle-miles traveled. For most of 2016 the retail price of a gallon of gas (all grades) was less than $2.40, but for the first half of 2017 it averaged $2.50 and for the second half of 2017 averaged $2.65. For the first half of 2018 the average was roughly $2.85.

The collision paid claim frequency rate has also flattened, echoing the pattern of vehicle miles traveled. These new patterns suggest that the beleaguered private passenger and commercial auto claims might finally see some relief following a few years of combined ratios well north of 100.

Automated Vehicle Symposium: Recap

The Automated Vehicle Symposium took place in San Francisco July 9-12.  I.I.I.’s Brent Carris files this report.

Gaining consumer trust is essential to the success of automated vehicle (AV) deployment. It was a point stressed continuously throughout the conference.

U.S. Department of Transportation (DOT) Secretary, Elaine Chao, along with many others, noted that 94 percent of auto accidents occur due to human error. AV control can drastically reduce human error-caused accidents but reaching the “0” level of accidents will be a long work in progress. Joint data sharing by public and private institutions is imperative in the transition to an AV world.

During Secretary Chao’s keynote address, she emphasized the six principles that govern DOT policy for AV technology regulation:

  • Safety is top priority
  • Policies will be flexible and tech-neutral
  • Regulations will be performance based
  • The DOT will collaborate with states and localities
  • The Department will provide stakeholders with assistance to facilitate the safe integration of AV systems into the transportation system, and;
  • The Department recognizes that autonomous vehicles will have to operate side-by-side with traditional vehicles, in both urban and rural areas

Chao briefly discussed insurance, saying “Insurance frameworks are adaptable to the AV world.” Timely data sharing by auto manufacturers and other AV data collectors with insurance companies will be necessary to facilitate proper insurance coverage. Data could be used to establish: Liability in the event of an accident; accurate underwriting and pricing of insurance policies; risk mitigation and control measures. Insurance companies will have to take a proactive approach to ensure timely data sharing and develop consumer perceptions on safety, liability, and coverage for AVs.

In a white paper issued to coincide with the event, the Travelers Institute outlined its views on how autonomous vehicles will change the personal and commercial auto insurance markets.

The DOT announced the third iteration of its Automated Vehicles policy document is slated for release by the end of 2018. The Automated Driving System 2.0: A Vision for Safety was downloaded over 125,000 times since its release in 2017. The 3.0 version will focus on AV development across all modes of transportation – passenger vehicles, trucks, rail, and maritime.

Another important topic was preparing U.S. workers and employers for the automated vehicle future. Lessons from past transitions show that while initial job displacement may occur, full employment eventually returns.

A Securing America’s Future Energy (SAFE) study estimated that the advent of AVs are projected to increase the unemployment rate to a small degree in the 2030s and to a somewhat larger degree in the late 2040s, with a peak, temporary addition to unemployment rates of 0.06–0.13 percentage points. However, an estimated $800 billion will eventually be gained in annual societal benefits due to accident reduction (economic impact and quality of life improvements), congestion mitigation, reduced oil consumption and from the value of time gained from AV. Many speakers stressed that planning for an AV future should start now.

 

 

From the I.I.I. Daily: Our most popular content, March 20-27

Here are the 5 most clicked on articles from the I.I.I. Daily newsletter.

  1. Presentation: Rising Auto Costs

  2. Trending news article: Video shows moments before Uber robot car rammed into pedestrian, The Wall Street Journal

  3. Blog post: The challenge of population projections: future strain on Medicare and Social Security may be even greater than Census figures would suggest

  4. Member Bulletin article: Big Data and Race, R Street

  5. Presentation: Driving while high: Facts and public attitudes

To subscribe to the I.I.I. Daily email daily@iii.org.

 

A new report sheds light on increasing auto loss costs

In the second half of 2013 personal auto insurers began noticing an increase in auto collision losses. Crash rates had been falling for more than 25 years due to improvements in safety awareness, technology and enforcement, and the reasons for the sudden uptick were subject to much speculation.

In response, the Casualty Actuarial Society, the Society of Actuaries and the Property Casualty Insurers Association of America joined forces to analyze these trends.  The product is a paper containing some of the findings around collision frequency. Further analysis is being conducted on frequency trends for other coverages and for severity.

Findings include:

  • Increase in congestion, as measured by drivers per lane mile and commute times among others, positively correlates to collision frequency.
  • Mobile broadband access (used as a proxy for the likelihood that a driver may have a mobile device while driving) appears to have no impact on collision frequency.
  • The system (no-fault vs. tort) doesn’t appear to impact the expected collision frequency, but has a big impact on the variance of the frequency.

The group’s goal is to provide an analytical basis for discussing and understanding auto insurance loss cost drivers that ultimately affect premiums. Subsequent reports are expected to be released.

Source: Auto Loss Costs Trends Report, January 2018

Americans are becoming less fearful of driverless vehicles

A survey published last week by AAA found that Americans are warming up to the idea of driverless vehicles with 63 percent of U.S. drivers reporting feeling afraid to ride in a fully self-driving vehicle down significantly from 78 percent in early 2017.

Men (52 percent) are less afraid than women (73 percent) of riding in a self-driving vehicle, and millennials are the least afraid (49 percent).

 “Education, exposure and experience will likely help ease consumer fears as we steer toward a more automated future,” said AAA Automotive Engineering and Industry Relations Director Greg Brannon.

The survey also found that U.S. drivers continue to report high confidence in their own driving abilities. Three-quarters (73 percent) of U.S. drivers consider themselves better-than-average drivers. Men tend to be most confident in their driving skills with 8 in 10 considering their driving skills better than average. This is despite of the fact that more than 90 percent of crashes are the result of human error.

 

Auto theft projected to rise for the third consecutive year

The steady decline in auto thefts which started in 1991 is largely attributable to the rise of modern keys, fobs and ignitions, and the ubiquity of statewide anti-theft taskforces. But insurers are keeping an eye on the increase in auto thefts that occurred in 2015 and 2016 and which is projected to continue in 2017, according to a recent Risk Information newsletter.

Car owners have become complacent about theft, with 56 percent of Americans reporting that they rarely or never worry that their car will be stolen. In fact, car owners are getting so relaxed about theft that thousands of vehicles are stolen each year because keys or fobs are left in the vehicle, according to the National Insurance Crime Bureau.

Thieves are also constantly devising new and sophisticated means of stealing autos. Tactics include acquiring smart keys, switching vehicle identification numbers; and using stolen identities to secure loans for expensive vehicles.

Thieves also now have access to devices which search for signals from nearby wireless key fobs and use that signal to unlock and start cars. To counteract this trend a growing market has sprung up for boxes or pouches for key fobs especially designed to block radio transmissions. You can purchase one on Amazon.

The FBI estimates that the number of motor vehicle thefts increased 7.4 percent in 2016 over the prior year. Approximately $5.9 billion was lost nationwide to motor vehicle thefts in 2016 with the average dollar loss per stolen vehicle of $7,680.

The I.I.I. has Facts and Stats on auto theft here.

The Week in a Minute, 8/25/17

The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights.

Hurricane Harvey is expected to bring heavy rainfall and strong winds to Texas and Louisiana over the next few days.

The 25th anniversary of Hurricane Andrew making landfall in Florida on August 24, 1992, generated significant media coverage this week.

The National Transportation Safety Board is convening in D.C. on Tuesday, Sept. 12, at 9:30 a.m., to discuss the fatal Tesla crash which occurred last year in Florida.

 

 

The Litigation Trends Behind Deteriorating Profits in Commercial and Personal Auto

The commercial auto line showed a spectacularly rapid deterioration of reserves beginning in 2012. In 2013 carriers begin to cite their trucking books as the source of increased frequency of severe claims, higher than expected large losses and deteriorating loss ratios. This recent GenRe article examines the causes which include:

  • A driver shortage affected the quality of the driver pool with more young, inexperienced drivers operating trucks.
  • Vehicle utilization levels increased due to an improved economy and lower gas prices.
  • Increase in vehicle miles travelled
  • Greater availability of safety data on motor carriers has led to attorneys use of this information to target commercial auto cases and win them.
  • Attorneys are succeeding in shifting responsibility from the person behind the wheel to the employer and winning large “nuclear verdicts” of over $10 million.
  • Increase in traumatic brain injury (TBI) cases. if an attorney can find an expert to allege a TBI, verdicts can be driven to higher levels. The “super experts” are winning TBI arguments in front of today’s jurors.

Some of these trends are the same ones affecting personal auto lines. The author warns that claims departments need to be prepared and proactive.