IRC: Amount Spent on Claims per Insured Vehicle Is on the Rise

Auto insurance policyholders are filing more injury claims than in recent years, and the increased frequency is driving up insurer costs and has altered the previous trend of fewer claims being filed, but for greater dollar amounts, according to a new report.

Average claim payment per insured vehicleThe Insurance Research Council says personal injury protection (PIP) claims in particular are growing in both severity and frequency, a change the report’s authors say is being driving largely by claims activity in New York, Florida and Michigan.

Those states are three of the dozen nationwide with no-fault vehicle coverage systems that were designed to reduce the number of lawsuits stemming from accidents and to provide for efficient payment of claims. But insurers and industry organizations say the systems are vulnerable to overbilling and other dishonest claims activity.

According to IRC—a division of the American Institute For Chartered Property Casualty Underwriters—PIP claim costs per insured vehicle nationwide rose by more than 18 percent from 2008 to 2010. The average per-vehicle PIP claim cost in Florida climbed 62 percent over that period, according to IRC, which says those costs have increased in Michigan by more than 120 percent over the last 10 years.

“These are not encouraging findings for insurers or drivers,” Elizabeth Sprinkel, senior vice president of IRC, said in a news release. “While we hope these findings represent temporary conditions, we can’t be sure that is the case and can’t afford to ignore the factors driving rising claim costs.”

IRC researchers say increases in the severity of bodily injury liability claims nationwide have been offset, at least in part, by stabilization in the number of claims filed. But they note that 2010 was the first time in 16 years that bodily injury claims did not decline in frequency.

The report is the latest from industry experts to blame the no-fault systems in several states for increases in insurer costs.

According to the Insurance Information Institute (III), dishonest claimants, medical providers and attorneys in some no-fault states are taking advantage of coverage providers through staged crashes, inflated claims, unnecessary medical procedures and other questionable tactics. Insurers say that dishonesty forces them to increase premiums for consumers seeking car insurance with no down payment and other coverage types in order to maintain profitability.

According to an III study released earlier this month, drivers in Florida and New York—the fourth and fifth most expensive states for coverage, according to the National Association of Insurance Commissioners—will pay a combined $800 million extra on premiums this year because of unscrupulous claims activity.

Critics of Michigan’s no-fault system, the only one nationwide that requires insurers to cover up to a lifetime of medical and rehabilitative costs for victims of automobile crashes, have likewise been calling for an overhaul.

Michigan drivers are legally required to pay into a state fund that helps finance PIP claims that total more than a half-million dollars. That fee, which was $145 this year, is collected by insurance companies for every vehicle they cover.

Insurers claim the system burdens them with prohibitively high health care costs and has caused policy rates in Michigan to be among the highest nationwide. According to the American Insurance Association, PIP claims costs in Michigan have climbed 20 percent in the last four years because of the state’s lifetime benefits mandate.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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