Groups Ignore Claim Severity and Fatalities are on the Rise
SACRAMENTO, Calif. –The American Property Casualty Insurance Association (APCIA) issued the following statement in response to the latest misinformation reported by the Consumer Federation of America (CFA) and the Center for Economic Justice (CEJ) about auto insurance premium relief provided during the COVID pandemic. This statement can be attributed to David Snyder, APCIA vice president, international & counsel.
“CFA and CEJ are wrong on just about everything in their latest report. The fact is that insurer profits are less than 2 percent of each auto insurance premium dollar. The vast majority of what they call profit are expenses used to handle claims, sell and service policies and pay taxes and regulatory fees.
“While there was an initial drop in driving at the onset of the pandemic, there was a significant change in driving habits. However, as we have emerged from the lock-down, miles driven quickly rebounded and returned to pre-pandemic levels. However, driving habits changed and speeding and other dangerous driving activities increased, making crashes more severe. The CFA and CEJ totally ignore the increase in severity of crashes due to speeding, so that each mile driven was more lethal than ever, with a significant jump in fatalities from 2019-2020. (According to NHTSA traffic fatalities showed a significant 7 percent increase in 2020 compared to 2019. Additionally, speeding related fatalities jumped 11 percent in 2020 compared to 2019.)
“Most regulators did ask for appropriate premium relief, not CFA’s and CEJ’s one size fits all approach, and got it.
“Had unjustified premium cuts been ordered last year, it would simply have put additional upward pressure on rates this year because of the rapid increases in miles driven and the greater rate of crashes and losses. Would CFA and CEJ have been as supportive of the necessary increases as they are of the unjustified reductions they are demanding?
“Their unwarranted discount demands are both unfounded and potentially dangerous to the financial health and competitiveness of the insurance system.
“If CFA was truly interested in helping consumers rather than trying to score political points, they would be working with us to address the tragic increases in deaths and injuries on our highways that began last year and are continuing into 2021. The ongoing increase in speeding is driving up fatalities, the severity of claims and the cost of insurance.”
Facts About Auto Insurance Claims & Highway Safety Data
- The personal auto combined ratio dropped due to a temporary reduction in miles driven. Personal Auto loss ratios dropped to 91.9 percent in 2020, from 98.7 percent in 2019 and 97.7 percent in 2018. While personal auto writers provided various forms of rebate and significant rate reduction, the severity of claims continued to climb significantly, and miles driven has been rapidly increasing in 2021.
- According the NAIC, private passenger auto liability has been profitable for only two (2010 and 2019) of the last 10 years, averaging a 4.2 percent loss during that time frame. The picture does not improve when optional physical damage coverages are included, with insurers operating at a loss for 5 of the last ten years, or a 0.2 percent average profit.
- In October of 2020, the National Highway Traffic Safety Administration released a series of reports on traffic safety during the COVID pandemic. NHTSA found that reckless driving was up, causing more deaths. NHTSA said the reasons include more risky behavior, like an increase in speeding and a lower rate of seatbelt use, as well as a higher likelihood of drugs or alcohol being involved. The study also found U.S. roads were more dangerous in the second quarter of 2020 than they have been in years.