Over the last two decades, the world of U.S. auto insurance claims has witnessed a fascinating phenomenon. According to the Insurance Research Council (IRC), the number of claims being reported has taken a sharp nosedive, while the average payout per claim has surged dramatically. This divergence has given rise to intriguing insights and shifts in the landscape of auto insurance.
A Shifting Tide: Fewer Auto Claims Being Reported
In the mid-2010s, the IRC noted a steady decline in the number of auto insurance claims being reported. This decline, attributed to auto safety innovation, marked a significant shift in the industry. This long-term downtrend continued steadily until the mid-2000s when it plateaued. However, the pandemic caused a sudden plummet in claim frequency again, which still remained below pre-pandemic levels even in 2022.
A Surge in Severity: Larger Payouts for Claims
While people were filing fewer auto claims, the average cost per claim experienced an entirely different story. During the initial half of the IRC’s study period, the payouts from claims remained relatively restrained, with the size of average claim payments showing modest growth. But starting from the mid-2010s, costs to cover claims began accelerating, leading up to a sharp rise during the pandemic. As driving behaviors turned more reckless, and inflation soared, repair costs reached unprecedented heights.
What Does This Mean for Auto Insurance Buyers?
The shifting landscape of auto insurance carries significant implications for those seeking insurance. As someone who has an auto policy, understanding these changes can help you make informed decisions and secure the best possible coverage for your needs.
Here’s what you need to know:
- Conduct a Policy Review With a Qualified Agent – Given the surge in rising claim costs from supply chain issues, more technology in your vehicle, and inflation, make sure your policy aligns with your current coverage needs and driving habits. While in a volatile market, an outdated policy might not adequately protect you in the face of changing claim patterns, leaving you vulnerable to potential financial burdens.
- Capitalize on Safe Driving Rewards – As drivers experience fewer accidents due to safety innovation, many insurance providers offer incentives for safe driving habits. Consider reviewing what safe driving rewards are available to you through your insurance company. Practicing safe driving habits may reward you with discounts or lower premiums. By demonstrating responsible driving behavior, you can potentially lower your insurance costs and create a safer environment for everyone on the road.
- Work with a Knowledgeable Agent – Navigating the complexities of the auto insurance marketplace can be challenging, especially with the changing claims dynamics. Seeking assistance from a knowledgeable insurance agent can help you find the right coverage, cost savings, and opportunities to bundle programs for the right protection. Independent agents may have more industry data and markets as compared to direct-to-consumer solutions.
Conclusion
For drivers, understanding the the auto insurance marketplace is essential in making informed decisions about cost and coverage. Stay informed about the latest trends, be proactive in updating your policy, and consider the potential impact of claims fluctuations on your premiums. By working closely with an experienced insurance agent and opting for the right coverages, you can navigate the ever-changing landscape of auto insurance with confidence and secure your financial protection on the road.
