APCIA Warns Thefts, Inflation and Risky Driving Pushing Auto Claim Severity

Auto loss costs climbed rapidly this year as vehicle traffic returned nearly to pre-pandemic levels and motorists adopted more risky behaviors, the American Property Casualty Insurance Association said in a white paper released on Monday.

An increase in claim frequency and severity comes as supply-chain disruptions leave replacement parts in short supply, and the number of auto thefts reached the highest level in a decade, APCIA said.

The National Highway Traffic Safety Administration estimates that 38,680 people died in motor vehicle crashes in 2020, a 7% increase over the previous year and the largest number of traffic deaths since 2007.

“Insurers are increasingly concerned that since the start of the pandemic, Americans have embraced riskier driving behavior, such as impaired driving, speeding, and failure to wear a seatbelt,” stated Karen Collins, APCIA’s president of personal lines.

Only a year ago, insurers issued an unprecedented $14 billion in premium refunds after being pushed by consumer advocates because of plummeting clam numbers due to COVID-19 lockdowns.

But as those restrictions eased vehicle traffic returned nearly in full. U.S. Department of Transportation data released last month indicated that the number of miles driven in June 2021 was only 1% less than the number of miles driven during June 2019.

Motorists returned to more dangerous roads. The report notes that CCC Intelligent Solutions reported a 40% increase in collision/liability only claims and a more than 30% increase in all auto claims during the second quarter of 2021. CCC had recorded decreases in claims ranging from 10% to 40% during 2020.

Over the past five years, a 37.8% increase in the average severity of auto claims has more than been offset by a 30.4% decrease in frequency, APCIA said. The biggest surge in inflation rates since 2008 may push that trend even further.

The report says the US Labor Department posted a 5.4% increase in the Consumer Price Index from the year earlier. Housing used cars and gasoline were blamed for much of the increase, the report says.

The price of car and truck rental costs jumped 87.7%, used cars and trucks prices increased 45.2% and new vehicle prices climbed 5.3%.

The report said the increased prices for new and used vehicle is expected further increase severity. Total losses make up about 20% of auto claims, the report says, citing CCC data.

In the meantime, auto thieves have been busier than ever. The report cites National Insurance Crime Bureau data showing the number of auto thefts climbed to 873,080 in 2020, compared to 794,019 in 2019 and 775,240 in 2010. NICB reported in March that the number of catalytic converter thefts averaged 1,203 per month in 2020, compared to an average of 282 a month in 2019 and 108 in 2018.

The report says auto repair and replacement costs are expected to remain elevated “well into 2022.”

“Insurers continue to monitor the situation closely, though as frequency and severity continue to rise, insurers may be forced to pass these loss costs along to policyholders.,” the report says. “Given the trends, insurers are strongly encouraging drivers to minimize their risk by avoiding risky driving behaviors that may result in a loss.”