Auto Claims Trends: Frequency, Severity, Repair Costs, and Turnaround TimesBoth commercial and personal auto insurance rates have been climbing for some time now – but why? Insurance rate trends are largely driven by claims trends. Recent auto claims trends have been characterized by growing risks and rising costs.
Claims Severity and Frequency Have Surged
LexisNexis reports that auto claims have increased in terms of both frequency and severity since the COVID-19 pandemic. Bodily injury severity is up by 20% and material damage severity is up by 47%, while total loss claims have increased by 29%.
It’s impossible to point to a single reason for the surge. However, multiple factors appear to be contributing to the problem, including reckless driving, repair costs, and litigation.
Reckless Driving Is Up
Blame it on stress; boredom; or the temptation of nearly empty roads. Regardless of the reason, reckless driving surged during the COVID-19 pandemic. We are still feeling the impact today.
A study by IIHS on Virginia drivers found that speeding by at least 10 mph increased by more than 50% between March and June 2020. This could explain why traffic fatalities increased by 7% in 2020 even though the number of miles driven plummeted. NHTSA data shows that the biggest increases in fatal crashes involved speeding or alcohol and unbelted vehicle occupants.
The pandemic has ended, but many people think reckless driving habits have become more common. In a survey from Pew Research Center, 49% of respondents said people are driving more dangerously than they did before the pandemic, compared to only 9% of respondents who said they’re driving more safely.
Distracted driving is also a problem, especially among young drivers. According to LexisNexis, distracted driving violations among Gen Z drivers have increased by 24% compared to 2022 and by 66% compared to 2019. However, this is not just a Gen Z problem – across all ages, distracted driving increased by 10% from 2022 to 2023.
Repairs Are Slower and More Expensive
Another pandemic-related change has contributed to higher auto claims: repairs have started to take longer and cost more. Faced with labor shortages and supply chain disruption during the pandemic, many auto repair shops developed long backlogs. The J.D. Power 2023 U.S. Auto Claims Satisfaction Study found that auto insurance repair times nearly doubled between 2021 and 2023, reaching 23.1 days. In 2024, J.D. Power says repair times improved somewhat, averaging 18.9 days. However, that’s still noticeably longer than the repair times before the pandemic.
Longer repair times may lead to larger claims costs. The longer the claim drags on, the greater the administrative costs. Insurers may also incur additional costs due to rental coverage.
On top of these challenges, auto insurance claims costs are rising due to the changing nature of vehicles. As vehicles adopt more sophisticated technology, repairs become more costly. A car bumper loaded with sensors and cameras may help you avoid a crash, but, if you crash, that bumper will be expensive to repair. Even minor crashes may necessitate costly repairs and realignments.
The rise of electric vehicles is also a factor. According to Kelley Blue Book, electric vehicles cost 30% more to repair than gas-powered vehicles.
Litigation Is Adding to the Problem
Social inflation and nuclear verdicts have been leading to huge jury verdicts against transportation companies. Research from the Insurance Information Institute found that the inflationary total of $21 billion in auto insurance claims between 2014 and 2019 is due to social inflation. Some jury awards – such as a $141.5 million nuclear verdict against a small Florida trucking company (as reported by FreightWaves) – are astounding.
However, social inflation isn’t just an issue for commercial auto insurance. In a study from the Insurance Research Council, 89% of people recalled seeing attorney advertising in the past year and 52% of people thought attorney advertising increased the cost of insurance.
What Should Drivers Do?
The increase in claims costs is hard on insurers, but the resulting increase in insurance rates is hard on drivers and business owners. However, there are steps that you can take:
- Embrace cameras. Businesses should use dashcams and in-cab cameras to promote safe driving and ensure drivers who are not at fault are exonerated after a crash. Individual drivers may also like to invest in dashcams – if someone tries to stage a crash, a dashcam may be the only proof you have.
- Consider telematics. Businesses should use telematics to identify risky driving habits and improve operational efficiency. Individual drivers may also benefit from telematics and usage-based insurance programs, especially if they’re safe, low-mileage drivers.
- Drive safely. The most important thing to do to keep claims and costs down is to be a safe driver. Don’t speed, don’t drive under the influence, make sure everyone in the vehicle is using a seatbelt, and give the road your full attention. Encourage your family members and your colleagues to adopt safe driving habits.
Are you looking for personal or commercial auto insurance? Heffernan Insurance Brokers can help. Contact us.
