Automobile Insurance Background and Stats

Part
01
of three
Part
01

Automobile Insurance Background and Stats: Claims

The average cost of auto insurance increased from $786.65 in 2009 to $935.8 in 2016. The loss ratio was 71.24% in 2009 and 71.2% in 2018.

FINDINGS

AVERAGE COST OF AUTO INSURANCE

LOSS RATIO

  • 2009: 71.24%
  • 2010: 70.05%
  • 2011: 71.90%
  • 2012: 71.51%
  • 2013: 71.01%
  • 2014: 72.45%
  • 2015: 75.29%
  • 2016: 78.73%
  • 2017: 75.57%
  • 2018: 71.92%

PRIVATE PASSENGER AUTOMOBILE NET PREMIUMS WRITTEN

LIABILITY

COLLISION/ COMPREHENSIVE

AUTO INSURANCE LOSSES

PASSENGER VEHICLE COLLISION COVERAGE INSURANCE LOSSES

2015-2017 MODEL YEARS
  • Claim frequency: 7.4
  • Claim severity: $5,573
2010-2012 MODEL YEARS
  • Claim frequency: 6.9
  • Claim severity: $4,245

RESEARCH STRATEGY

In order to fulfill this request, we searched government websites such as the US Census, US Department of Treasury, Bureau of Transportation, National Association of Insurance Commissioners; industry portals such as the Insurance Information Institute, Automobile Insurance Plans Services Office (AIPSO), and Highway Loss Data Institute; and research agencies such as S&P Global Market Intelligence and Verisk Analytics. Each of the aforementioned sources publishes statistics on automobile insurance but we found no precompiled information on the number of automobile claims and the loss ratio. While we found other data points to calculate the loss ratio, we did not find enough data to calculate the number of automobile insurance claims.

We attempted to calculate the number of insurance claims using the severity data we found on the Insurance Information Institute. The formula for severity: severity = incurred losses/ incurred claims. While we found the severity numbers for collision, comprehensive, bodily injury, and property damage type of automobile insurance, we did not find the incurred claims for the insurance types. Incurred claims data was found for liability category, comprising bodily injury and property damage, and physical damage category, comprising collision and comprehensive, as a whole. Therefore, calculating the number of collision, comprehensive, bodily injury, and property damage type insurance claims was not possible.

CALCULATIONS FOR LOSS RATIO

Loss Ratio = Incurred Losses *100 / Earned Premiums
Earned Premiums = Liability premium + Collision/ comprehensive premium

The calculations have been shown in the Loss Ratio tab of the attached spreadsheet.



Part
02
of three
Part
02

Automobile Insurance Background and Stats: Cost and Development

The US automobile insurance industry is changing in response to new technologies and customer habits. This industry is poised to continue to reap the benefits of lowered costs over time as a result of these changes by continuing to develop new policies and strategies to effectively implement. Cloud computing has been in the conversation for the industry for at least the past 7 to 8 years.

Cloud Computing

  • According to a 2012 Gartner survey, cloud computing was a top IT priority of CIOS among property & casualty insurers that included auto insurers in the industry.
  • Another 2012 Gartner survey found that 41% of the insurers surveyed were already using cloud computing productively and 41% were developing and planning to implement cloud computing within the next 6-12 months.
  • In 2012, cloud computing was in the development and implementation "trigger stage", with 5 to 10 years to widespread adoption.
  • The auto insurance industry was encouraged to continue to develop and implement cloud computing in 2014, to reap the benefits of offering their customers self-service platforms to report and check the status of their claims online, chat live with agents, choose auto repair facilities, and schedule rental cars.
  • Telematics is currently being further developed and implemented within the auto insurance industry that uses cloud computing by installing a device in cars that records metrics like speed, distance, and the type of road a customer is traveling on. This device also monitors the braking pattern and driving style, which is utilized by insurance companies to accurately compute the premium.
  • It has been estimated that 70% of US auto insurers will be using telematics usage-based insurance by 2020.

Dashboard Cameras

  • The US auto insurance industry has offered zero discounts over the past ten years for customer use of dashboard cameras.
  • In 2015, the reasoning of top US auto insurers to explain not including the cost and impact of dashboard cameras in their premiums was that dashboard cameras do not prevent accidents from happening, and there is no evidence that they make people better drivers, so why would there be a discount?
  • In 2018 there was still uncertainty by US auto insurers if dashboard cameras are really cost-effective and will have a positive impact on their industry because such footage could help or hurt them in legal proceedings.
  • US auto insurers are now willing to review the dashboard camera footage of their customers, but they do not have any standard policies regarding reviewing or accepting such footage.
  • There is currently one state in the US, New York state, that is attempting to pass legislation that would make it mandatory for the auto insurance industry to offer a 5% discount for drivers who use dashboard cameras.

Autonomous Vehicles

  • Google and Vislab introduced autonomous vehicles in 2013.
  • In 2015, it was estimated that autonomous vehicles would significantly lower costs for the US auto insurance industry because 90% of accidents were caused by human driver error and accident frequency could drop as much as 80%.
  • The auto insurance industry began to build an employee base of AI engineers, data analysts and robotics specialists in 2018 who can help them develop products that will empower them to remain relevant in the autonomous vehicle marketplace.

Ridesharing

  • Ridesharing nearly tripled in the United States from 2011-2016.
  • The dramatic rise in ride sharing in the United States was determined to likely begin to impact the auto insurance industry in 2016 with lowered costs from a decrease in the frequency and severity of losses, changes to auto repair and replacement costs, new customer groups, and new insurance products to meet their needs.
  • Ride sharing in the United States increased another 15% from 2015 to 36% in 2018.
  • The US auto insurance industry is currently developing ride sharing policies to fill gaps in coverage for personal auto insurance policies with auto insurers filling these gaps differently.

Research Strategy

We first researched cost and development insights into the US auto insurance industry over the past five to ten years from multiple credible sources like Accenture, InsuranceTech and Statista and focused on cloud computing and dashboard cameras. We determined that the automobile insurance segment is included within the broader category of property & casualty insurance to further validate our findings from the Gartner surveys. We then researched other cost and development insights into the US auto insurance industry over the past five to ten years to complete our findings. Each section provides statistics from previous periods as well as more recently.


Part
03
of three
Part
03

Automobile Insurance Background and Stats: Human Psychology

Memory loss after a car accident can result from a number of conditions, such amnesia, post-traumatic stress disorder, acute stress disorder, and traumatic brain injury.

Amnesia

  • Retrograde amnesia is less common and involves the loss of memories that were formed before the traumatic event occurred. Typically, those suffering from retrograde amnesia can remember events that happened in the distant past, while struggling to recall what happened recently. For example, a person may know who the president was a decade ago but not know who the current president is.
  • The period that someone forgets before the accident may be anywhere from minutes to a few months.

Post-Traumatic Stress Disorder (PTSD)

  • Symptoms of PTSD include intrusive memories (such as flashbacks), avoidance of anything associated with the event, negative changes in mood or thinking, and changes in reaction (either physical or emotional).

Acute Stress Disorder (ASD)

  • Acute stress disorder (ASD) is a condition that develops in people who have experienced or been exposed to traumatic events and may go on to experience PTSD. As such, symptoms last between three days to one month.
  • Five to 20 percent of people exposed to a traumatic event have ASD, of which about half develop PTSD.
  • Symptoms of ASD are similar to those of PTSD, and include avoidance of traumatic memories, intrusive memories/dreams, negative moods, disassociative symptoms, and arousal (e.g. difficulty sleeping or concentrating).
  • Cognitive behavioral therapy, stress-reduction techniques, and psychotropic medications are all options for treating ASD.

Traumatic Brain Injury (TBI)

  • Traumatic brain injury can occur when a person suffers a violent blow to the head or a sever jolt. Mild TBI has temporary symptoms, while more serious TBI may have long-term complications.
  • TBI can damage areas of the brain that form new memories and allow a person to recall old ones.
  • Symptoms of mild TBI include memory loss and difficulty concentrating nausea, dizziness, and mood changes. Moderate to severe cases of TBI include all of the above, in addition to symptoms such as loss of consciousness convulsions, and profound confusion.
  • While mild cases of TBI require only rest and over the counter painkillers, serious cases demand more invasive treatments. These include anti-seizure and coma-inducing drugs, surgeries to repair the skulls or improve blood flow in the brain, and a range of rehabilitation specialists.

Impact of Memory Loss on Vehicle Claims

  • According to the law firm Slappy & Sadd, the short term memory loss and recall difficulties that can result from traffic accidents impact victims both because of the type of injury and subjective nature of the injury. Additionally, people may feel ashamed and reluctant to admit memory loss to themselves and others. Consequently, short term memory loss may impact vehicle claims because victims might not remember exactly how the accident occurred, or if they do they will not necessarily disclose it when making a claim

Research Strategy

We began by looking at the types of injuries that both result from traffic accidents and cause memory loss. We then researched each one individually on respected medical websites and mental health campaign groups to see how they happen (physically vs. non-physical trauma) and the ways them impact memory formation and retention. Finally, we looked at legal sites to investigate how car accidents and memory loss interact legally.
Sources
Sources

From Part 02
Quotes
  • "From Gartner’s Hype Cycle for Property & Casualty (P&C) Insurance 2012: According to Gartner’s 2012 CIO survey among 85 insurers, cloud computing is among the top five IT priorities of CIOs. Additionally, a recent Gartner webinar survey among P&C insurers revealed that 41 percent of respondents are already using cloud computing productively, with another 41 percent currently implementing or planning to implement this new style of computing during the next six to 12 months.” Cloud adoption for the industry is in Gartner’s technology trigger stage, five to 10 years to widespread adoption."
Quotes
  • "Insurance companies can also derive similar benefits -- by adopting cloud services, insurance firms can reduce capital and operating expenses and improve productivity through the convergence of cloud and collaboration technologies, which allows employees to collaborate on shared applications from anywhere, using any device. This convergence also allows insurance firms to provide their customers with self-service platforms that enable them to report claims online, check on claims status, select auto repair facilities, schedule rental cars, chat live with insurance agents, etc. These cloud and collaboration capabilities can significantly enhance customer satisfaction, reduce customer attrition, strengthen the brand and unlock new monetization opportunities through development of uniquely targeted solutions for specific customer segments."
Quotes
  • "Telematics insurance usually works by setting up in the vehicle a device, termed usually as a Black Box, which records different metrics of the latter, such as speed, distance, and the type of road one travels. This device also monitors the braking pattern and driving style, which is utilized by insurance companies to compute the premium accordingly. "
  • "Insurance telematics poses the potential to alter the current scenario of motor insurance and positively impact claims, risk selection, and fraud detection. As of now, the industry is still at a nascent stage of development."
Quotes
  • "Usage-based insurance is a type of insurance in which the costs are based on driving behaviors of policy holders. By 2020, it is forecast that 70 percent of U.S. car insurers will be using telematics UBI. "
Quotes
  • "Why, do auto-insurance companies still not offer a discount, have no standard policy on accepting or reviewing footage, and refuse to nudge you to get one when they practically beg for post-accident photographs? My first guess is they’re not sure whether [dash cams] will be good for them or not good for them,” says Peter Crosa, past president of the National Association of Independent Insurance Adjusters and current CEO of Peter J. Crosa & Co., an independent adjusting firm that works with many big auto-insurance companies. You’re as likely to capture video that incriminates you as video that helps you, he says."
Quotes
  • "Unfortunately, U.S. car insurance companies are slow to embrace the technology. You can’t get any dash cam discounts here in the states yet, and you may not be able to for a while, if ever. "
  • "Anderson’s remarks are in line with what the rest of the top U.S. auto insurance companies said about dash cams when we spoke with them. They don’t prevent accidents from happening, and currently there isn’t any evidence that points to dash cams making people better drivers, so why would there be a discount?"
Quotes
  • "In 2017, New York State Senator Jose Peralta sponsored a bill proposing a mandatory 5% insurance premium discount for drivers using dashcams. As of 2019, the bill continues to make its way through the system. It has not yet been enacted. If the bill passes, however, then other states could follow suit."
Quotes
  • "While the Google driverless car has received most of the publicity, the VisLab's BRAiVE autonomous car has been showing off. "
Quotes
  • "While there will be a wide variety of effects on insurance from the rise of driverless vehicles, the increased safety features of these vehicles will have the most profound impact on auto insurers over the long term and will be the underlying force behind industry trends. More than 90 percent of accidents each year are caused by driver error, and accident frequency could drop by 80 percent. Over the long term, with the car stock being replaced by more and more autonomous vehicles, the risk profile of vehicles on the road will substantially decrease, leading to much lower total losses. "
Quotes
  • "With the advent of the autonomous vehicle industry, and continued growth of the gig and sharing economy in the transportation space, there will be significant changes to the way we look at automotive insurance. As a result, insurance companies are looking to bring on AI engineers, data analysts and robotics specialists who can help them develop products which will enable them to remain relevant in this ever-evolving marketplace. Adding to the list of top employers – specifically for AI and robotics talent – are some US automobile insurance companies like Allstate, who are under immense pressure to determine how and to what extent they will soon be impacted by the rise of the self-driving vehicle phenomenon."
Quotes
  • "Ridesharing trips have nearly tripled in five years in the United States. Insurers may have to rethink their role in the mobility ecosystem and their relationship to drivers, owners, and vehicles. For future underwriting models, insurers will likely need to consider the advent of new sources of risk and liability. This likely means: A decrease in the frequency and, over time, the severity of loss events Changes to vehicle repair and replacement costs New customer categories and the creation of new insurance products "
Quotes
  • "Insurance companies are developing rideshare policies to fill in the gaps between your personal coverage and your rideshare company’s coverage. They fill the gaps differently."
Quotes
  • "36% of people in the US used rides sharing services in 2018, an increase of 15% from 2015."