Triple-I: U.S. Auto Insurers Seeing More Accidents, Higher Costs

For immediate release
New York Press Office: Michael Barry, 917-923-8245, michaelb@iii.org

NEW YORK, March 3, 2022—Personal auto insurance premiums have returned to pre-pandemic levels and existing trends are putting upward pressure on rates, according to the Insurance Information Institute (Triple-I).

“Auto insurers are seeing the frequency and severity of automobile accidents rise quickly as drivers return to the nation’s roadways,” said Sean Kevelighan, CEO, Triple-I.  “After these accidents occur, the claim payouts are higher due in part to the higher price of auto replacement parts.” The parts cost inflation has been exacerbated by pandemic-related supply chain and labor disruptions, according to a just-released Triple-I Issues Brief on personal auto insurance rates.

“Having examined recent auto insurance industry trends, Triple-I found auto premiums have not kept pace with inflation—especially when it comes to auto replacement part costs,” Kevelighan said.

For example, the combined ratio, the percentage of each premium dollar an insurer spends on claims and expenses, rose to nearly 100 percent in the personal auto insurance market nationwide in 2021.  In other words, U.S. auto insurers spent about a $1 on claims and expenses last year for every $1 these same insurers collected in premiums.

At the beginning of the COVID-19 pandemic in the spring of 2020, U.S. auto insurers soon thereafter cumulatively returned about $14 billon to policyholders in the form of cash refunds and account credits in anticipation of fewer accidents due to reduced driving. That was the case briefly, but the frequency and severity of auto accidents quickly grew, even with fewer cars on the road.

Auto accident fatalities increased as well, after a four-decade downward trend. In 2020, 38,824 deaths occurred on U.S. roads, the most since 2007, according to the National Highway Traffic Safety Administration (NHTSA). NHTSA noted in 45 percent of fatal crashes, the driver was engaged in at least one of the following risk behaviors: speeding, alcohol impairment, or not wearing a seat belt.

Individual auto insurance premium rates are calculated based on a range of factors, such as the vehicle’s make and model, the policyholder’s driving record, and the vehicle’s location, among others.  Yet an auto insurer’s claims payout experience in each state also is considered when regulators assess an insurer’s rate filing.

The Triple-I has a full library of educational videos on its YouTube Channel. Information about Triple-I mobile apps can be found here.