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.
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.
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.
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.
The average payment for auto physical damage insurance claims increased at more than double the rate of inflation from 2010 through 2018, according to a new study from the Insurance Research Council (IRC).
The study, Patterns in Auto Physical Damage Insurance Claims, found that average payments increased 3.7 percent annualized during the study period, while the overall Consumer Price Index (CPI), as well as the CPI for motor vehicle maintenance and repair, grew 1.8 percent annualized.
“Damage to vehicles accounts for a growing share of the costs of paying auto insurance claims,” said David Corum, CPCU, vice president of the IRC. “As vehicle technology continues to evolve, an understanding of the cost drivers behind auto physical damage claims will be important in addressing issues in auto insurance availability and affordability.”
Other findings from the study:
Total losses have become more common and more expensive.
Catastrophe claims accounted for about one in five dollars paid for comprehensive claims.
Deductibles and policy limits have not kept pace with the growth in payments.
Physical damage claims have become less likely to have associated injury claims.
The rate of attorney involvement is lower in physical damage claims than in auto injury claims.
For most aspects of physical damage claims, there are significant differences among states.
According to National Association of Insurance Commissioners (NAIC) data, vehicle damage claims accounted for 60 percent of incurred personal auto losses in 2016, even as the injury cost index – a measure of injury costs relative to physical damage liability claims – declined. Enhanced passenger protections have contributed to a drop in the frequency of injury claims relative to the number of accidents, underscoring an important reality: auto safety improvements are effective but add to the cost of claims, as they lead to more expensive repairs when accidents happen.
With auto claims costs greatly outpacing inflation, it’s worth noting that – as Triple-I previously reported – auto insurance premium growth has trailed CPI growth, particularly since the COVID-19 pandemic and its subsequent economic downturn has led to insurers giving back $14 billion to policyholders in the form of refunds, premium reductions, and dividends.
The study presents findings from a collection of more than 220,000 claims closed with payment under the three principal private passenger auto physical damage coverages in claim years 2010, 2014, and 2018.
For more information on the study’s methodology and findings, contact David Corum at (484) 831-9046 or by email at IRC@TheInstitutes.org.
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.
“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.”
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.”
“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 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.
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 millionin charitable giving specifically related to the pandemic.
My five-year-old nephew, Ben, is a great source of pride to his electrician father, Dan. Last Halloween, Ben refused to trick-or-treat at a particular house because he noticed that the decorations there were a fire hazard.
Halloween is supposed to be fun, but it has always involved risks and potential liabilities. The video below outlines some of the “traditional” hazards and ways to mitigate them, from eliminating trip-and-fall dangers to preventing fire and pet-related perils.
And while much of the focus of Halloween-risk mitigation is on the home, Donald R. Grady, a Boston personal injury attorney, says the biggest dangers actually involve cars.
“You see an uptick in automobile accidents,” Grady says. “Especially with teenagers, who don’t have adults with them and who rush from house to house.”
The curse of 2020
Perhaps predictably by now, 2020 has brought the spooky holiday threats of its own. COVID-19 has introduced new Halloween concerns.
The Centers for Disease Control and Prevention (CDC) has published a list of low-, moderate-, and high-risk Halloween activities for a time of pandemic.
Lower-risk activities include:
Carving or decorating pumpkins with members of your household and displaying them
Carving or decorating pumpkins outside, at a safe distance, with neighbors or friends
Decorating your house, apartment, or living space
Having a virtual Halloween costume contest
Having a Halloween movie night with people you live with.
Moderate-risk activities include:
Participating in one-way trick-or-treating, where individually wrapped goodie bags are lined up for families to grab and go while continuing to social distance
Having a small group, outdoor, open-air costume parade with people distanced more than 6 feet apart
Attending a costume party held outdoors, where protective masks are used and people can remain more than 6 feet apart.
The CDC provides caveats and additional guidance for these and other moderate-risk activities, so if you’re even thinking about them, definitely read the relevant guidance. It advises against the following:
Traditional trick-or-treating where treats are handed to children who go door to door
“Trunk-or-treat,” where treats are handed out from trunks of cars lined up in large parking lots
Attending crowded costume parties held indoors
Going to an indoor haunted house where people may be crowded together and screaming
Going on hayrides or tractor rides with people who are not in your household
For a variety of reasons, many people have moved during the pandemic. One in five U.S. adults either changed residence due to the pandemic or know someone who did, according to a Pew Research survey. There are many safety factors to consider if you are moving, and it’s also important to understand how insurance protects your possessions before, during, and after a move.
Loretta Worters, Vice President Media Relations, Triple-I, has put together this comprehensive explanation of how insurance covers you when you move.
What’s Covered/What’s Not
Homeowners and renters policies provide coverage for belongings while they are at a residence, in transit, and in storage facilities — but they will not pay for any damage done to personal property while being handled by movers when packing or moving the items.
Types of Coverage to Consider When Moving:
Trip transit insurance covers personal property for perils including theft, disappearance, or fire (the same perils covered by homeowners or renters policy) while in transit or storage. Trip transit insurance can be written for the full value of the property or as excess coverage over and above that provided by the moving company. It does not, however, cover breakage or flooding at, say, a storage facility.
Special perils contents coverage will cover breakage of all but fragile items.
A floater will fully protect high-value items, such as jewelry, collectibles, fine art, etc.
Storage insuranceis also important should someone need to temporarily or permanently store items before or after a move.
Coverages Available Through Moving Companies
The type of liability coverage a moving company offers for damage or breakage is not technically insurance and therefore is not governed by state insurance laws. Under federal law, however, all interstate movers must offer two different liability options—full-value protection and released-value protection. Most movers offer both options for intrastate moves, as well. It’s important to understand the various types and levels of protection available and the charges for each option.
Full-value protection is a plan under which the mover is liable for the replacement value of the belongings in a shipment. If personal property is lost, destroyed, or damaged while in the mover’s custody, the company will repair or replace the item or make a cash settlement for the cost of the repair or the current market value. The cost for full-value protection liability coverage varies by mover; different deductibles are available, which will reduce or increase the price. Note that full value liability is more expensive and is the default.
Released-value protection is offered at no additional charge beyond the moving fee. However, it provides only a minimal protection—no more than 60 cents per pound per article. So if the mover loses or damages a 10-pound stereo component valued at $1,000, the homeowner would only receive $6.00 in compensation (60 cents x 10 pounds).
Separate liability coverage may be offered by a mover to augment released-value protection for an additional fee. If this extra coverage is purchased, the mover remains liable for the amount up to 60 cents per pound per article, but the rest of the loss is recoverable from the insurance company up to the limit of the policy purchased. The mover is required to issue and provide a written record of the policy at the time of purchase.
Check Professional Mover’s Agreement
Homeowners should review the mover’s contract and ability to:
Determine exactly what kind and how much coverage the moving company provides for property loss and/or damage.
Review the contract carefully for the estimated value of your possessions and match it to the homeowner’s list. An up-to-date home inventory will make this task easier.
Find out the maximum value of the mover’s insurance should goods be damaged.
Check that the moving company’s policy includes coverage for damage done to the homeowner’s premises—both the house they are leaving and the one being moved into.
Know what the time limits are for filing claims with the mover and decide whether they are reasonable—take time to unpack and check for potential damage.
Moving Yourself If you choose to move yourself, you won’t have the benefits of a moving company’s coverage if belongings are damaged or broken. To be protected:
Consult with an insurance professional and review the trip transit, special perils, and floater options.
Buy the optional collision damage waiver coverage from the rental company if renting a truck. Collision and comprehensive coverage likely will not transfer to a non-owned moving van, only to a private passenger vehicle.
New Home, New Insurance
If moving to a new state, or even from a city to a suburban area, a new home insurance policy will be needed. That’s because a new home is a different property with different risks, which means different coverages may be required. The cost of the policy also may vary. For example, a larger home in a coastal area will likely be more expensive than a small apartment in an inland city.
When buying a new home, consider insurance costs. Rates are based on many factors, including square footage, geographical area (is the home in a flood, earthquake or hurricane-prone area of the country?); the age and construction of a home (is it brick or wood shingle?); roof condition; proximity to a fire station; and credit history. Notify the insurer about a new address and make sure to inquire about possible savings on home and auto premiums for features like a shorter commute, a gated community, or lower-crime area than previously, alarms, or other security systems.
The same holds true for car insurance. That’s because a new state may have different requirements or factors that result in a different policy cost. Even if moving within the same state, insurance carriers should be notified to ensure policies are up to date.
In-State vs. Out-of-State
An out-of-state move can have big implications, because not all insurance agents or companies are licensed to write policies in every state. Insurance requirements may also vary across state lines Call your agent to see if the current company can write policies in the state they are moving to. If not, consider it an opportunity to shop and compare new policies.
When to Make the Switch
In most cases, the new owner will need to have proof of insurance at closing when buying the new home. An insurance agent should be notified well in advance of closing and providing a timeline for the move so coverage is in place at the appropriate time. Depending on the insurer, coverage on the former home will generally remain in effect until the sale of the property is complete, as long as premiums are paid, which should be confirmed with the insurance agent.
If the homeowner relocates before the existing home is sold and it remains vacant or unoccupied, there may not be coverage under the existing homeowners policy. Insurers typically discontinue coverage on a home if it has been unoccupied for more than 30 days, so prospective homeowners should explore other options with their insurer.