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Auto Claims Rising in Frequency and Severity

Posted by Luke Stotmeister on Aug 24, 2023 10:44:23 AM

Reports on auto insurance trends have shown a drastic increase in bodily injury and property damage claims related to auto accidents. During the pandemic, claims dropped significantly due to a decrease in vehicles on the road but have since risen to above-average numbers. While the end of the pandemic may play a role in the increase, there are also other factors that have played into the increase of both claims and their severity. Understanding the aspects that have impacted auto accidents can ensure you devise a proper risk management plan for your personal and commercial needs.

Auto Claim Rates

According to the LexisNexis Risk Report, bodily injury and property damage claims have increased by 35% since 2019 and collision claims severity has increased by 40%. The report also showed that speeding violations have been up 20%, which tends to have the biggest impact on collision and bodily injury occurrences. The concern lies in the fact that trends are continuing upwards, rather than leveling out at pre-pandemic numbers. In addition, the combination of claim frequency and severity both increasing has resulted in higher total losses and premium spikes across the country.

Factors Contributing to Claims Increase

There are many factors leading to the spike in auto claims in the past year. The landscape continues to evolve and factors such as technological advancements, economic shifts, and societal norms have all impacted claim rates.

Technological Advancements

One of the primary aspects driving the surge in auto claims is the recent technological advancements in the auto industry. Vehicles today are equipped with modern computer systems that enhance sensors, operations, and the overall driving experience. While these features certainly have an array of benefits regarding safety and control, they also require more complicated repairs. Even a minor collision could result in higher losses if the vehicle is equipped with certain advanced driver assistance systems (ADAS). The intricate nature of these features requires specialized mechanics and parts, which inflate the overall cost of repairs.

Hybrid and electric vehicles also impact the severity of claims for similar reasons. The batteries in these vehicles can be costly to replace, and as they are the central competent of these cars, even a minor accident can call for repairs.

Inflated Medical Costs

Inflation has been a national concern for the past two years, with rates spiking high enough to cause concern for a recession. Inflation has made its way into every industry, including the medical field. In the aftermath of an auto accident, medical costs can account for a significant portion of claim settlements. Procedures, drugs, medical attention, and ongoing therapy cost more now than ever before, and even minor injuries can lead to a high medical bill. In addition, chronic injuries that require ongoing care and physical therapy are common after an auto accident and may require additional payouts to account for extended treatment. All these aspects not only account for the extended duration of claims but elevated financial implications as well.

Repair Costs

The economic landscape has also played a significant role in the rising costs of auto claims. The costs of raw materials required for auto repairs have increased, including aluminum and steel, which directly impact the cost of repairing damaged vehicles. Additionally, supply chain issues have made it more challenging to access certain auto parts, causing delays in repairs and longer claim periods. Claimants may require rentals during the delay, and ultimately end up with higher total claim costs.

How to Avoid Auto Insurance Claims

Though claims are increasing, there are many practices to enforce to avoid falling victim to one. Practicing safe driving habits, maintaining your vehicle regularly, routine inspections, and using technology wisely can all help avoid the need for a claim, and reduce the cost if one occurs. For personal auto use, driving habits are the number one indicator of accident likeliness. Defensive driving and vigilant attention to surroundings are important to avoid a collision. For commercial driving, ensuring all employees are safe and well-trained vehicle operators can reduce the likelihood of an accident.

Auto Insurance and Risk Management

The rising severity of auto insurance claims is a multifaceted occurrence that emerges from technology, human behavior, medical advancements, and economic dynamics. Rising medical costs, economic factors, and the long-term impact of injuries each contribute to the financial burden of claims. For insurers and stakeholders in the insurance industry, understanding these underlying factors is paramount to providing quality service to clients. Individuals and businesses should work with agents and risk management professionals who recognize the evolving landscape of auto claims. Insurance providers can adapt their pricing models, underwriting strategies, and risk management practices accordingly. As the auto industry continues to advance, insurance is key to effectively navigating the challenges posed by the rising severity of auto insurance claims.

Insurance with ECBM

ECBM is dedicated to providing the best possible coverage at the best price for our clients. Our team has the experience and expertise in insurance coverage to build a policy that will protect your organization from any risks you face. If your business needs a policy review or is looking for a hands-on broker, we are here to help. Contact us for more information on our services.