If Auto Injury Claims Frequency Is Falling, Why Are Claims Costs Rising?

October 7, 2015

Auto insurance bodily injury claims costs are still increasing in the United States, even though better vehicle safety has helped reduce claims frequency, according to the Insurance Research Council (IRC).

The insurance organization said improved vehicle safety, graduated licensing laws and other safety factors have not been enough to offset substantial increases in the cost of injury claims.

The average cost per paid liability claim has jumped more than 30 percent from 2005 to 2013, the researchers found.

The IRC said the results point to a need for further scrutiny of what is driving these costs.

“Documenting the specific drivers of cost in the states where cost growth is greatest will be a priority for the IRC in the years ahead,” Elizabeth Sprinkel, an IRC senior vice president, said in prepared remarks.

Bodily injury liability claims frequency fell nationally by 14.5 percent from 2005 to 2013, the IRC determined in “Trends in Auto Injury Claims, 2015 Edition.” That translates to a dip from 0.94 paid claims per 100 insured vehicles to 0.81 paid claims.

At the same time, however, the average cost per paid liability claim grew from $11,738 to $15,506, a jump of 32.1 percent.

The same thing happened with personal injury protection (no fault) claims, which dropped in frequency from 1.49 to 1.25 paid claims per 100 insured vehicles over the same period. But, according to IRC, the average cost per claim jumped in this category from $5,802 to $8,017, a 38.2 percent hike.

The IRC said that every state except for Florida, Kansas, Kentucky and Maryland saw a decline in bodily injury claim frequency from 2005 through 2013. Also, every state with personal injury protection coverage (PIP), except for South Carolina, had a drop in PIP claim frequency.

Meanwhile, every state except for West Virginia experienced a jump in bodily injury claim severity from 2005 to 2013. All U.S. states save for Pennsylvania experienced an increase in PIP claim severity.

Some states saw jumps that were worse than others. Michigan, for example, had the average payment per personal injury protection claim soar from $25,997 to $44,756 over the studied period, a 72.2 percent jump. New York and Washington saw increases of more than 40 percent, the IRC noted.

The IRC suggested that reports of a jump in traffic deaths could signify “a change in the beneficial long-term trend of declining claim frequency,” something that could make costs trends more severe.

The IRC is a division of the American Institute For Chartered Property Casualty Underwriters (The Institutes) and is supported by property/casualty insurers.

The IRC report is based on claim data from national and state-level statistical reporting agencies.

Source: Insurance Research Council

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