Car insurance claims drop; industry unable to explain phenomenon
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The good news for auto insurance companies is that claims have dropped 15% in the last four years, with the result of a similarly healthy bump in profit. The bad news, at least for an industry that depends on the reliable statistical prediction of trends, is that there is no clear reason for the reduction in payouts for dented sheetmetal and bodily injury.
While modern technology can help prevent collisions, it likely doesn't account for the drop in this particular five-year period (but, check back in another half-decade). More likely is that drivers in the 45-64 age group are the safest on the road, and the average driver continues to get older as the Baby Boomers age. Additionally, it's thought that many drivers opt not to report accidents that don't involve any injuries, and contemporary safety technology may account for an increased number of people who walk away from an accident without so much as a scratch.
One thing seems certain - insurance companies may be making more money from this trend, but it's not being reflected in the average insurance premium. What a surprise, eh?
[Source: Chicago Business via Instapundit]
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Reader Comments (Page 1 of 2)
Chris 12:18PM (8/01/2006)
Funny, they can explain clearly why my rates are going up.
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Corey 12:22PM (8/01/2006)
Au contraire, #1. My insurer, CSAA, can't even do that aside from "rates just changed." I would expect rates to go down as my car depreciates year after year. But hey, like extortion, so it is what it is.
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Gary 12:27PM (8/01/2006)
Around here, people are basically afraid to make a claim (even if justifed) unless there's absolutely no other option. The problem is, the companies immediately raise your rate dramatically for even the slightest claim. It just doesn't make sense economically for people to use it unless it is really a major amount of money. So - you have to pay them the premiums, but people are afraid to ever ask them to pay a claim. Must be a great business to be in.
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mike 12:38PM (8/01/2006)
My rates have dropped. And the annual re-imbursement check has increased the past few years.
www.usaa.com
If you haven't heard of the company, you probably are not eligible to be insured by them.
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ghughes 12:45PM (8/01/2006)
Where are the rate cuts, then? Its kind of like hurricane insurance - no hurricanes for 45 years in Florida, rates not cut, now they are tripling after a few bad years.
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Karl 12:50PM (8/01/2006)
I'd bet my paycheck it's because most driver's opt to settle the minor fender bender claims amongst themselves.
Accidents happen, but when your insurance comapany is looking for every reason to raise your premiums, you avoid telling them about things that will assist them.
Since automotive insurance is mandated by most states, this is the route I'd take, unless someone was injured or a car was likely to be totaled.
If you think your insurance rates are too high, check your clue report. There's a write up of how to do it here: http://articles.mechlogs.com/4/82
I did, I was surprised to find my brother's accidents on my report. I didn't own the car, I didn't have him on my policy, I didn't even live in the same county as he does, but there he was, in all his metal twisting glory.
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Karl 12:56PM (8/01/2006)
Mike, one of the benefits of Military Service. I wish there were more ins. cos. with their sense of respect to their customers.
Ghuughes. Welcome to insurance profit 101. I'd like to know how I pay $10,000+ in premiums and have one minor fenderbender ($700 damage) they raise my rates. I only reported it because I thought my health ins. wouldn't pay the medical expenses. Turns out, my motorcycle policy didn't have medical coverage any way, so I didn't need them. I'd have paid the $700 out of pocket instead of taking the $200 increase in premiums. That's recovering their payout several times over.
Why do I pay premiums then?
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Jim in Tampa 12:59PM (8/01/2006)
State Farm Florida just raised my car rates 50% because "of the increase in paid claims here in our state". And they just got approval for a 50% increase in homeowners insurance. But I'm lucky to have State Farm's homeowners insurance so I just shut up and pay it.
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zinger 1:03PM (8/01/2006)
my rate for insurance has dropped about 20% this year, nice suprice,
helping factor: clean record
than again I don't drink, play video games, or watch movies when I drive !
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Jaffa 1:04PM (8/01/2006)
The first thing to remember is that the insurance industry is a free market, with a number of companies pricing their coverage at a loss before interest kicks in. Prices will fall if the insurance companies believe it is possible.
The fact they havent fallen reflects their uncertainty about the current market behaviour.
So why are they falling?
The TREAD act is forcing companies to make better cars and instigate recalls. It wont be long before the insurers star using ODI data to monitor vehicle quality and start claiming back costs from manufacturers for poor quality and dangerous products.
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TerryB 1:16PM (8/01/2006)
Insurance and fuel, the income tax that the Government only wishes it could levy. To bad we cannot vote for insurance representation. If you change insurance companies you can get a better rate, but only for a couple years if you are real lucky.
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Drewboy 1:22PM (8/01/2006)
Here in Central Illinois, preferred companies are dropping rates very consistently, after they peaked in 2003/2004. The market changed, companies made an underwriting profit, and now they're lowering rates to reflect that. Hey, I wouldn't complain, my rate is now less than half it was two years ago!
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Allin 1:36PM (8/01/2006)
Miles driven may have decreased recently also. If people are driving fewer miles, carpooling or taking public transit to save gas money, fewer accidents. How big a factor I have no clue.
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Karl 1:57PM (8/01/2006)
I just got my premium renewal. My 5.2% INCREASE "reflects a statewide premium change that affected Progressive Direct customers in Pennsylvania.
Like all auto insurers we periodically" screw our customers to increase profits.
Blah, blah, blah. "the premium increase for your policy is less than 6%....
Many factors affect your auto insurance premiums. Recently rising medical costs and vehicle repair costs are contributing to the increase in auto insurance premiums...."
I'd really like to have the option to put my cash into a fund with other people where when we have an accident, it is paid out of this fund and would be administered by a not-for-profit association instead of dumping money down a hole where not only does it never come out, when something needs to be paid, it doesn't come out of the hole, it's just delayed in how it's sucked out of my wallet.
FWIW, my last conviction was in August of 2003. It was a license credentials violation, which basically means I didn't pony up the license renewal fee fast enough.
If you're with me on the NFP insurance Fund, email me. I'd like to get a few other people on board to discuss how it could be done.
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kevin 2:04PM (8/01/2006)
I got my policy renewals yesterday here in SW Florida, and to my suprise my motorcycle rate went down by $180 per year (2 motorcyles), but my car insurance (1 car and 1 truck) went up $190 per year. Thanks alot Progressive.
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Tim C 2:05PM (8/01/2006)
Insurers are all insured through re-insurers like Munich Re or Swiss Re. If pay-outs in other arenas of insurance such as hurricane damage, earthquakes or medical negligence are high (e.g. Katrina) then the re-insurers will hike their rates as they re-insure all types of insurers. Your car insurance company passes on these costs to you the motorist. It's nothing to do with how you drive.
The value of your car is only one factor in calculating your premium. If you were a multi-convicted drink-driver working as a courier and living in a bad area of town your premium would be sky-high regardless of the value of your car purely because of the risk you pose to others.
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Jay 2:14PM (8/01/2006)
>insurance companies may be making more money from
>this trend, but it's not being reflected in the
>average insurance premium.
I often wonder why people make such a huge stink about the price of gas going up, when pretty much no one is talking about how high insurance premiums and associated insurance taxes in some municipalities have gotten over the last decade or so.
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Freddy 2:22PM (8/01/2006)
The reason there are so many and creative auto insurance commercials is that writing the policies is so profitable. Get the driver's attention, get his policy money, go to the bank. Auto insurance profits helped Warren Buffett (GEICO) go from very rich to extremely rich.
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felonious monk 2:27PM (8/01/2006)
Can't explain the trend?
Well, let's see... record high gas prices... some people driving less... some can't even afford to drive anymore (the underpriviledged).
Could there be a connection?
Golly gee. I don't know.
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felonious monk 2:27PM (8/01/2006)
Can't explain the trend?
Well, let's see... record high gas prices... some people driving less... some can't even afford to drive anymore (the underpriviledged).
Could there be a connection?
Golly gee. I don't know.
Reply