Report: Car Insurance Price Trends Are out of Sync with Economy

'00-'10 annual national average auto insurance expenditures

Click image to view larger version

A presentation given last month by an industry expert indicates that the price of insuring cars has been rising steadily for the past three years.

According to the Insurance Information Institute’s (III) senior vice president and chief economist, Steven Weisbart, the car insurance market hardened at the end of 2007 after a four-year period of declining prices. In the wake of that soft market, the national average expenditure on coverage is estimated to have risen year-to-year for the past three years by 2.8 percent, 4.5 percent and 5 percent, respectively.

This has resulted in an estimated 12-percent overall increase in the average coverage expenditure — from $795 in 2007 to $895 in 2010.

Weisbart’s presentation, which is titled “Mega-Trends Influencing the Future of Auto Insurance” and was given last month at the National Auto Insurance ExecuSummit in Connecticut, also highlighted a number of other emerging trends that may be of concern to members of the industry.

Claim trends for different types of coverages have been fluctuating since 2005.

For  bodily injury and property damage liability, rises in claim severity have been offset by declines in claim frequency, though the future of this trend and the question of whether it can be sustained warrant observation.

Data from the presentation indicate that insurers in no-fault states are seeing adverse claims trends, with the averages for frequency and severity each projected to have risen by more than 10 percent over the past two years.

Another underscored cause for concern is the aging of the population. Weisbart cites U.S. Census Bureau projections estimating that the population of Americans under 65-years-old will grow by about 16.5 million people between 2010 and 2020, while the 65-and-older population will grow by more than 14.5 million people during the same period. Since drivers 65 years old and older are overrepresented in fatal crashes and are considered by some coverage providers to be a high risk auto insurance group, this poses a “looming public health crisis” to which insurers will have to adapt.

Slides from the presentation are available on the III website.

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.

No comments yet.

Comment on this article