Drivers get riskier, compounding pressure on insurers: APCIA
The American Property Casualty Insurance Association (APCIA) says drivers in Nevada and across the US are engaging in riskier driving behaviour, compounding the effects of inflation, and increasing auto claims costs.
APCIA provided testimony on what is driving up auto insurance costs in a webinar held by the Nevada Division of Insurance. Robert Passmore, APCIA department vice president for personal lines, said: “In addition to inflation trends, and riskier driving behaviour by the public, cost increases for medical and hospital services, and outsized growth in lawsuit verdicts and legal system abuses are negatively impacting and pressuring the industry with increased losses.
“These escalating costs are driving up auto insurance premiums in Nevada and across the country.”
APCIA released a study in July titled “Auto Insurance: The Uncertain Road Ahead” that revealed insurance claims inflation has continued to rise faster than the underlying consumer price index (CPI), far outpacing increases in auto insurance premiums.
In the report, APCIA found that losses on underwriting in 2022 for private US property casualty insurers were $25.6 billion, more than double the losses in 2021 and the worst result since 2011.
Private passenger auto insurance experienced the highest direct loss ratio among major lines of business at 80.2 percent (excluding loss adjustment expenses) in 2022, which represented an increase of 12.2 points from 2021 and 24.1 points from the low watermark of COVID-19 pandemic-impacted 2020.
US private passenger vehicle damage claim severity (ie, the average cost per claim for property damage liability and collision) increased nearly 50 percent from 2018 to 2022, impacted by rising auto repair and labour costs, inflation, and theft rates, among other things. Over the same period, average bodily injury claim severity increased 40 percent, reflecting an acceleration in medical inflation, legal system abuse, and a sharp increase in deadly motor vehicle accidents.
It also found that property casualty insurers’ premiums for personal auto increased just 6 percent for the year, far below the 24 percent rate of escalating losses.
“All indicators suggest elevated auto repair and replacement costs will stretch well into 2024 and potentially beyond. Medical inflation is also accelerating,” Passmore said.
“Insurers are urging drivers to reduce their risk by avoiding behaviours such as distracted driving, speeding and impaired driving that may result in a crash. Insurers are also advocating for better infrastructure, including reliable supply chains for vital auto parts and safer roads, which should result in fewer crashes, and controlling claims costs to help keep insurance premiums affordable for consumers.”
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