June 10, 2019 Auto Physical Damage

Changes in Weather Patterns and Claims Impact

We haven’t reached mid-year 2019, and the United States has already experienced several severe weather events, including a polar vortex and many hail storms in the Midwest, massive flooding in the Northern Plains, and heavy El Niño rains in California. Weather plays a critical role in claims impact—both the frequency and severity of auto physical damage claims and it is common to observe seasonal changes in industry data. The percentage of non-drivable repairable vehicles typically spikes during months with colder temperatures and higher levels of precipitation (Figure 1).

We haven’t reached mid-year 2019, and the United States has already experienced several severe weather events, including a polar vortex and many hail storms in the Midwest, massive flooding in the Northern Plains, and heavy El Niño rains in California. Weather plays a critical role in claims impact—both the frequency and severity of auto physical damage claims and it is common to observe seasonal changes in industry data. The percentage of non-drivable repairable vehicles typically spikes during months with colder temperatures and higher levels of precipitation (Figure 1). The percentage of total losses also increases accordingly with non-drivable repairable vehicles (Figure 2). percent of repairable vehicles non-drive [dkpdf-remove]Percentage of Repairable Vehicles Designated as Non-Drivable [/dkpdf-remove]

Figure 1: Percentage of Repairable Vehicles Designated as Non-Drivable based on Mitchell Industry Data
Percentage of Vehicles Designated as a Total Loss [dkpdf-remove]Percentage of Vehicles Designated as a Total Loss[/dkpdf-remove]
Figure 2: Percentage of Vehicles Designated as a Total Loss based on Mitchell Industry Data
Last year, 2018 delivered greater-than-average precipitation in the last fifteen years (Figure 3) based on the highest percentage (25.9%) of days with precipitation. The fourth quarter of 2018 saw particularly high levels of rainfall, especially along the Atlantic Coast and parts of the Midwest. The state of Georgia experienced record levels of rainfall during this time period (Figure 4). The impact of heavy rains is illustrated by the difference in the percentage increase experienced between Q3 2018 and Q4 2018 based on states that recorded average, above average and well above average (including record) levels of rainfall during Q4 2018 (Figure 5). States with well above average levels of precipitation saw a 7% increase in average repairable severity while states with above average and average levels saw 6.22% and 5.19% increases respectively. Percentage of Days with Higher than Average Precipitation [dkpdf-remove]Percentage of Days with Higher than Average Precipitation[/dkpdf-remove]
Figure 3: Percentage of Days with Higher Than Average precipitation1
Statewide Precipitation Ranks [dkpdf-remove]Statewide Precipitation Ranks[/dkpdf-remove]
Figure 4: Statewide Precipitation Ranks (Q4 2018)2
Percentage Repairable Severity Increase [dkpdf-remove]Percentage Repairable Severity Increase [/dkpdf-remove]
Figure 5: Percentage Repairable Severity Increase between Q3 2018 and Q4 2018 (Mitchell Industry Data) based on precipitation ranks2
Stopping short of employing full-time meteorologists, auto insurance carriers must still be cognizant of weather patterns and forecasts outside of potential CAT events in order to appropriately set reserves and staffing levels. Figure 6 represents the National Oceanic and Atmospheric Association’s (NOAA) forecast for precipitation in the coming months. It is reasonable to expect increased claims volumes and higher average severity in areas where precipitation levels are higher than average. Clearly, much of the country is set to experience more rainfall than is typical in the impending three months. Forward-thinking insurance carriers may choose to provide updates (either through regular communications or targeted alerts) to their customers that inform them of the potential risks of driving during periods of inclement weather to help bring awareness to driver safety, and thus potentially reduce overall claims exposure. Forecasted precipitation for May-July 2019 [dkpdf-remove]Forecasted precipitation for May-July 2019[/dkpdf-remove]
Figure 6: Forecasted Precipitation for May-July 20193

Ryan Mandell

Director of Claims Performance, Auto Physical Damage

Ryan Mandell is Director of Claims Performance for Mitchell’s Auto Physical Damage business unit where he works hand-in-hand with insurance executives and material damage leaders to provide actionable insights and consultative direction for their claims organizations.

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