New Study Finds That Auto Injury Claim Severity Pushes Insurance Costs Higher | The Institutes

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New Study Finds That Auto Injury Claim Severity Pushes Insurance Costs Higher

Malvern, Pa.,—February 18, 2019Despite today’s safer cars and roads, a rise in the severity of auto injury claims is increasing costs for insurers and creating upward pressure on the cost of coverage for consumers, according to a new study from the Insurance Research Council (IRC). However, claim frequency trends remain unclear, as enhanced safety features, increased driving, and other factors combine to produce relatively small net changes. 

The report, Trends in Auto Injury Claims, 2019 Edition, documents both countrywide and state auto injury claim trends using private passenger auto insurance claim data from national and state-level statistical reporting agencies. From 2008 through 2017, the average insurer payment per insured vehicle (loss costs) grew 31 percent for bodily injury (BI) claims and 26 percent for personal injury protection (PIP) no-fault claims. On an annualized basis, BI and PIP loss costs grew 3.1 and 2.6 percent per year. During the same period, inflation averaged under 2 percent. 

From 2008 through 2017, of the countrywide BI claim frequency fluctuated between 0.80 and 0.83 paid claims per 100 insured vehicles. PIP claim frequency fell slightly, from 1.31 to 1.27 claims per 100. Some states experienced significant increases in claim frequency, including Florida and Georgia, where BI claim frequency increased 33 and 24 percent, respectively. Florida also experienced a significant increase in PIP claim frequency (10 percent) from 2008 through 2017. 

Virtually all of the countrywide growth in BI and PIP loss costs was due to rapid increases in the average cost of paid claims. From 2008 through 2017, BI and PIP claim severity increased 32 and 30 percent. States with significantly higher-than-average increases in BI claim severity included Georgia (63 percent), Texas (61 percent), Louisiana (50 percent), and New York (48 percent). States with higher-than-average increases in PIP claim severity included Michigan (60 percent) and New York (46 percent).

“The continuing increase in auto injury claim severity is preventing consumers from realizing the full financial benefits of enhanced vehicle and road safety,” said Elizabeth Sprinkel, senior vice president of the IRC. “We also need to better understand why claim frequency in some states continues to increase despite improvements in vehicle and road safety. Documenting the specific cost drivers in the states where cost growth is greatest remains a top priority for IRC.

For more information on the study’s methodology and findings, contact David Corum at (484) 831-9046 or by email at Corum@TheInstitutes.org. To obtain a copy of the study, visit IRC’s website at www.Insurance-Research.org.

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The Insurance Research Council is a division of The Institutes, the leading provider of risk management and property-casualty insurance knowledge solutions. The IRC provides timely and reliable research on public policy issues affecting insurance companies and their customers. The IRC does not lobby or advocate legislative positions. It is supported by leading property-casualty insurance organizations.