Verisk has been closely monitoring new-normal trends for the U.S. personal auto market, providing likely scenarios and guidance, and strategizing with customers to help them innovate, adapt, and accelerate their competitiveness in these uncertain times. As the pandemic journey continues through 2021, a year and a half of change has left several “suitcases” to unpack.
This is Part 1 of a 2-part series examining the dramatic shifts in mileage patterns and implications for the industry. Part 2 looks at factors that could influence growth and profitability.
Holiday traffic patterns appear to be a bellwether for the country’s response to the pandemic.
Unemployment Up, Then Down
Getting back on the road has led through peaks and valleys. In March and April 2020, the unemployment rate spiked by more than 11 points, the fastest increase since monthly tracking of unemployment began in the 1940s.1
Historically, unemployment and recessions have affected mileage and auto insurance. Car-dependent Americans have tended to prioritize keeping their vehicles even during tough times. During the Great Recession, mileage dropped by about three percentage points in the years following the economic downturn2, and consumers prioritized car payments over other types of debt.3
- As we unpack our insights, this aspect of the 2021 personal auto outlook may be better. Although the job market remains fragile, unemployment has improved by more than 9 points in August 2021 compared with the peak in April 20204.
This is a big bag of changes marked by significant fluctuations—far more than the 3-percent mileage decline of the Great Recession and with a much more quickly shifting landscape.
Verisk performed an internal mileage analysis in the context of the ongoing pandemic and the evolving new normal. One caveat: This dataset includes some small business vehicles but slants more toward personal than commercial auto.
If we divide mileage from periods of the pandemic in 2020 and 2021 by corresponding 2019 mileage as a baseline, the time period breaks down into seven phases, determined by identifying consistent patterns in Verisk’s internal mileage analysis.
Here are three more important pandemic-related mileage trends we’re observing that can indicate shifts in the market or risk exposures.
“On the Road Again” vs. “Home for the Holidays”
Holiday traffic patterns appear to be a bellwether for the country’s response to the pandemic. Memorial Day 2020 trends were difficult to measure amid the rapid reopening increases in mileage during May, but the Fourth of July and Labor Day holidays in 2020 drove relative year-over-year (YoY) weekly mileage up by 4-6 percentage points over the week preceding each holiday.15
By Thanksgiving 2020, as coronavirus cases surged, miles driven deviated less from non-holiday new-normal patterns: Compared to the previous week, YoY patterns for Thanksgiving were down 1.6 percentage points.16 As the post-Thanksgiving COVID-19 surge continued, many Americans heeded warnings by the Centers for Disease Control and Prevention to avoid holiday travel. And the expression, “Home for the Holidays,” became literal as many Americans refrained from auto travel over the Christmas week. With less car traffic, the YoY difference in mileage over that week was a steep 15 percentage points lower relative to the week before the holiday.17
Holiday mileage in 2021 appears to be rising again,18 but as the second wave of 2020-2021 showed, the pandemic can quickly influence driving patterns.
Since the Pandemic Began, Has Anything Related to Mileage Been “Normal”? Interstate Mileage During 2021 Holidays and Summer Months—Sort of
During the 2021 Memorial Day and Fourth of July holiday weeks, one metric did get close to "normal": Miles driven on the nation's interstate highways during 2021 matched 2019 levels, and this trend has generally continued over the summer months to date. But achieving this “normalcy” required a shift in the mix of miles toward commercial vehicles relative to passenger-vehicle miles, driven by the rise in e-commerce since the pandemic.
Federal Highway Administration vehicle classification system categories 5 through 12—vehicles with more than two axles or more than four tires—offer a reasonable proxy for commercial vehicle traffic (referred to as "trucks" by the U.S. Department of Transportation).21 Passenger vehicle miles were down 0.6 percent and 3 percent, respectively, for the two holidays, spanning the categories of passenger cars, pickup trucks, motorcycles, and buses. Truck mileage was up 4 percent and 18 percent for the respective holidays.22
Interstate highway mileage—more than a quarter of miles driven in the United States—was down 7 percent for passenger vehicles and up 8.4 percent for trucks in the first half of 2021 compared with 2019 levels.23 This represents more than 5 billion additional commercial truck miles and a 2.2 percentage point shift in the mix of vehicle miles toward commercial trucks in the first half of 2021 alone, growing from about 17 percent of Interstate traffic in 2019 to more than 19 percent today. This accounts for roughly 75 billion Interstate truck miles in aggregate in the first half of 2021 alone.24
These commercial vehicle traffic trends will also likely extend to “last mile” deliveries on local roadways, and the blending of vehicle usage between personal and commercial will likely expand as the pandemic-accelerated, on-demand economy continues to grow. Transportation network drivers have begun returning to the roads as demand increases,25 although they’re still in short supply and riders face significant surcharges.26 But Verisk expects more drivers to return, leading to continued upticks in usage.
The (Relative) Return of Rush Hour
As employment and mileage have recovered through the middle of 2021, pre-pandemic rush hour driving patterns have begun to return. While the morning peak is lower than in the past, this could change, depending on progress in reopening schools for the fall. Still, remote work trends may permanently reduce morning rush-hour peaks. Afternoon rush hours may rebound more because remote workers still have post-work activities and errands to run, but the routes and patterns may be different, starting from the home rather than the office.
Other Factors That Could Drive 2021 Mileage Shifts
The FHWA shows vehicle miles traveled (VMT) in 2020 decreased by about 430.2 billion miles, or a 13.2-percent decrease.28 Verisk estimates that personal auto mileage decreased roughly 15 percent to 16 percent in 2020.29 Even as mileage decreased in 2020 and has continued to rebound in 2021, a variety of factors have pushed and pulled at odometer readings.
One factor may be perceived safety: The pandemic has illuminated the need for personal automobiles and auto insurance. A 2020 study by McKinsey found almost 80 percent of respondents identified the private car as the “mode of transportation you consider safe for your health concerning a COVID-19 infection.”30
Additional factors could increase overall mileage exposure and other risks through 2021:
- Reluctance to use public transportation and ride-share services31: Summer rentals booked up early, but people may be less likely to fly than they were historically until families and more people are vaccinated, including children.
- Shift to the suburbs32: This can translate to increased car ownership and more miles driven.
- Delivery network (DoorDash, UberEats) growth: This pandemic-driven trend may continue and grow as people blend commuting back into the mix.33
- Return to bars, social events, and crowded venues34: Will the return to human interaction raise the potential for drunken driving—and more use of ride sharing?
Remote work is perhaps the biggest trend that could pull down mileage in the long run; personal auto mileage may never return to peak pre-pandemic levels.35 E-commerce trends could also pull personal auto mileage down,36 although additional commercial vehicle mileage exposure may replace some of this driving. Last, we’ve seen how the virus can quickly affect travel, so variants and surges may have the most potential to drive down mileage in the short term.
Verisk will continue to monitor the public health environment and pandemic-related trends, such as remote work, to measure their impacts on mileage moving forward.
- 2021 will likely look much different than 2020 for the personal auto market: Insurers will likely experience rising frequency and severity (see Part 2 of this series) like after the Great Recession—but on a more accelerated timeline—as mileage and rush-hour congestion patterns continue to rebound.
- It may be time for insurers to leverage analytics and outreach to align mileage and commute information to avoid premium leakage for this critical rating factor on policies that were adjusted downward last year, and to avoid potential adverse selection as insurers compete with more granular rating plans and usage-based alternatives.
- E-commerce trends accelerated by the pandemic will likely have personal vehicles sharing the road with more commercial vehicles on some roadways, creating traffic patterns as dense as before the pandemic.
- The on-demand economy is blurring the line between personal and commercial auto insurance. ISO is planning to file changes to address the new exposures related to on-demand delivery services.
Where to next?
The evolving mileage trends have implications beyond frequency and severity, affecting the very size of the personal auto market as measured by premium volume. The effects were dramatic in 2020 and will likely continue to be through 2021, albeit in different ways. Check out Part 2 of this series, which explores growth and profitability implications and more aspects of the emerging new normal in personal auto.
See how one auto insurer improved its mastery of the mileage factor in rating—with a potential 7.2 percent lift in premium—when you read our new case study.