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Three reasons personal auto physical claims costs were rising before COVID-19

SUMMARY
  • Even before COVID-19 struck, physical damage claims costs were rising steadily
  • Other-than-collision claim costs are increasing on a by-peril basis
  • Bumpers, airbags, and the proliferation of light trucks have played a role in driving costs higher

For personal auto physical damage coverages, the pandemic’s impact is a by-now familiar story. Average claim frequency plunged as many workers traded commutes for remote work. Average severity grew, though, thanks in part to an increase in thefts and fewer low-speed accidents.

Actuarial And Strategic Data Insights

Yet an analysis (log-in required) of multistate1 insurance data reported to the ISO Statistical Database reveals that personal auto physical damage claims costs had been trending up years before the pandemic reshaped driving patterns. The severity story isn’t simply a tale of drivers discovering their inner Fast and Furious, but of more far-reaching automotive trends.

Physical damage: A (very) brief primer

In the ISO Personal Auto Insurance Policy Program, physical damage consists of two coverage types: Collision and other-than-collision (OTC). Generally, collision is when an auto hits something (except an animal) or when it’s overturned. OTC covers a number of specific perils including (but not limited to) theft, vandalism, glass breakage, fire, animal impacts, and wind and water.

According to ISO Statistical Data, average claims costs have been steadily increasing in collision and OTC since at least 2017. However, viewing the overall OTC trend line can skew our understanding. Some OTC perils—such as fire and wind and water—are variable and pegged to unpredictable weather events. Those don’t necessarily exhibit a clear trend. Others, such as glass breakage, tend to have high frequency but low severity. Examining OTC trends on a by-peril basis can give us a clearer picture of what’s happening.

So, what’s happening? In short: Claims costs for non-weather-related OTC perils are rising, alongside collision costs.

There are a number of factors behind these rising costs, but here are three significant ones:

1. Cars are getting safer

The ongoing effort to improve automotive safety has resulted in a number of technological innovations, auto design changes, and new regulations regarding airbag usage. Collectively, these efforts have saved lives,2 but they’ve also made cars more expensive to repair when damaged.

Take advanced driver assistance systems (ADAS) features, which include vehicle sensors, cameras, and other systems that detect road dangers, warn drivers, or even temporarily commandeer the controls to prevent an accident. Verisk research has shown that ADAS features help reduce accident frequency, but the sensitive electronics and cameras employed for ADAS systems are pricey to repair and easily damaged in an accident.3 Even a modest accident could become a significant loss if expensive ADAS features, such as sensors, are damaged.4  

Airbags also have a proven track record of saving lives and, with the advent of side-impact airbags, are also more prevalent in today’s auto fleet. And just like ADAS features, airbags also appear to be behind rising claims costs. That’s because airbags are expensive to replace. That in itself can raise costs, but it’s also had the downstream effect of catalyzing a black market for airbags. Disreputable auto services want stolen airbags so they can pass them off as new and pocket the price difference, creating a market for stolen airbags. Indeed, an average of 50,000 frontal airbags are stolen each year.5 

2. Blame it on the bumpers

American drivers seem to love their sport utility vehicles, pickup trucks, and minivans. While popular, the prevalence of these vehicles can create what’s called a “crash incompatibility” when they’re involved in an accident with smaller sedans. When a larger, heavier truck hits a smaller, lighter sedan, the damage is likely to be greater than if two similarly sized vehicles collided (to say nothing of the potential for death or injury of the passengers and drivers).   

Bumpers are part of the problem.

Car bumpers are regulated by a federal standard, but the bumpers on SUVs, pickups, and minivans aren’t held to any federal standard.6 The upshot is that light truck bumpers can be flimsier or higher off the ground than car bumpers and in low-speed accidents, these unregulated bumpers can cause excessive damage to pricey auto components like hoods, safety equipment, and engine cooling systems on the cars they hit.

3. The need for speed

While road speed limits impose a maximum speed for drivers, automakers are free to build cars with ever increasing horsepower. And they have. The 2019 model year auto had an average of 245 horsepower, four higher than the prior year’s models and double that of an auto in 1980.7 Faster cars lead to costlier accidents. The addition of just one horsepower per 100 pounds of vehicle weight has been found to increase the cost of collision losses by 5 percent.

To read the full analysis of multistate auto trends produced by Verisk’s Actuarial and Strategic Data Insights, please download circulars ASPA 2021022 and ASPA 2021013 (log-in required). For more information on Actuarial and Strategic Data Services, please contact Menachem Eisner at Menachem.Eisner@Verisk.com. For more information on personal auto actuarial data, please contact Raul Retian at Raul.Retian@Verisk.com.


Raul Retian

Raul Retian is senior director of ISO Personal Lines Core Products. He can be reached at Raul.Retian@verisk.com.

Menachem Eisner

Menachem Eisner is manager, ISO personal lines core products at Verisk. He can be reached at Menachem.Eisner@Verisk.com.


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  1. Data excludes Massachusetts, Texas, and Puerto Rico.
  2. Merianne Rose Spencer, et. al., Motor Vehicle Traffic Death Rates, by Sex, Age Group, and Road User Type: United States, 1999–2019, National Center for Health Statistics, Centers for Disease Control and Prevention, March 2021, < https://www.cdc.gov/nchs/products/databriefs/db400.htm >, accessed on October 18, 2021.
  3. Benjamin Preston, “The Hidden Cost of Car Safety,” Consumer Reports, January 30, 2020, < https://www.consumerreports.org/car-repair/the-hidden-cost-of-car-safety-features/ >, accessed on October 18, 2021.
  4. Ibid.
  5. Airbag Theft and Fraud, National Insurance Crime Bureau (NICB), < https://www.nhtsa.gov/sites/nhtsa.gov/files/airbag.pdf >, accessed on October 18, 2021.
  6. Huge cost of mismatched bumpers: When bumpers on cars and SUVs don’t line up (and many of them don’t), low-speed collisions produce more damage and higher repair costs, Insurance Institute for Highway Safety, December 2, 2010, < https://www.insurance-canada.ca/2010/12/02/huge-cost-mismatched-bumpers-bumpers-cars-suvs-dont-line-many-dont-low-speed-collisions-produce-damage-higher-repair-costs/ >, accessed on October 19, 2021.
  7. The 2020 EPA Automotive Trends Report, United States Environmental Protection Agency, January, 2021, < https://www.epa.gov/sites/default/files/2021-01/documents/420r21003.pdf >,  accessed on October 19, 2021.