Frequency and Severity Trends in Auto Claims
In late 2018, three of the largest auto insurers in the United States reported decreased frequency and increased severity in third quarter auto claims.
- Allstate’s gross auto property damage frequency dropped 2.7 percent, and severity spiked 7.7 percent.1
- Geico’s auto claims fell 2 to 3 percent, and collision severity rose 4 to 6 percent when compared to 2017.1
The Rise and Fall of FrequencyAfter a year-over-year increase from 2013–2017, the Insurance Information Institute identified an overall weakening trend of the collision paid claim frequency rate in 2018. At the same time, there has been a lessening rate of miles driven in each succeeding year since 2015. The institute noticed “a strong correlation between vehicle-miles traveled, on the one hand, and the collision paid claim frequency rate.”2 [dkpdf-remove][/dkpdf-remove] Allstate personal lines president, Glenn Shapiro, explains the frequency results as “Miles driven trends were one consideration” along with automobile improvements and “There’s more lane departure warning and blind spot warning…Some of those things have a favorable impact.”1
Safer and More Fuel Efficient Cars, Costlier CollisionsCollision claims frequency has the potential to decline even further with the widespread adoption of advanced driver-assistance systems (ADAS) in modern cars. The Insurance Institute for Highway Safety (IIHS) estimates as many as 1.9 million total crashes could be prevented or mitigated each year if forward-collision systems were standard on all vehicles.3 However, the average collision repair cost is expected to continue to rise based on new vehicle technology and the projected growth in special materials. At least one ADAS feature is available on nearly 93 percent of new vehicles available in the U.S.4 These components are most commonly found in the areas most prone to collision impacts—the front and rear bumper areas of vehicles. Mitchell analysts looked at the replacement costs of all parts that would typically be damaged in a front-end collision and found that repair costs grew from $1,652 for a 2010 Chevy Malibu to $3,627 for a 2018 Chevy Malibu.
Between 2012 and 2017, estimates written for vehicles with special materials grew from just over 3% to over 19%.In addition to ADAS, the major U.S. and Japanese auto manufacturers have also started introducing more high-strength steel, aluminum and other special materials to improve vehicle safety and fuel efficiency. A recent Mitchell Industry Trends Report concluded that between 2012 and 2017, estimates written for vehicles with special materials grew from just over 3 percent to over 19 percent. Also, there was an average increase in vehicle repair costs of approximately $458 for vehicles with specialty materials vs. those without, representing a repair severity premium of 15.7 percent for vehicles with special materials.