Since the COVID-19 pandemic struck more than a year ago, travel restrictions and remote work and schooling kept people close to home. With far fewer places to go, there were less people and cars on the roads, which had numerous implications for the insurance industry.
In the early days of the pandemic, auto claims dropped in frequency, according to an Insurance Journal article, ‘How COVID Impacts Insurance in Unforeseen Ways.’ One could naturally correlate less driving with less claims; however because roads were abandoned, drivers perhaps felt more liberated to drive recklessly, and claim severity increased. Lexis Nexis reports show that there was a “noted increase in high-speed instances first observed in mid-March 2020 and that held at 10% higher than 2019 figures for the remainder of the year; there were also reports of increased DUIs among younger generations of drivers (PRNewswire, 2021).
Moreover, preliminary data from the National Safety Council show that as many as 42,060 people are estimated to have died in motor vehicle crashes in 2020 -- a 24% spike over the previous 12-month period, despite miles driven dropping 13%. The increase in the rate of death is the highest estimated year-over-year jump that NSC has calculated in 96 years.[1]
Alongside these dire statistics, however, there were many drivers who refrained from driving at all. This led some insurers, often urged on by regulators, to offer premium rebates (Insurance journal, 2021) and/or temporarily suspend or cancel policies.
“With more people traveling less, the industry has also seen a significant increase in interest in telematics-informed programs and pay-as-you-go auto insurance,” said Meg Lech, Senior Product Development Specialist, AAIS, noting that the pandemic accelerated a trend
already underway.
Emptier roads have also provided a much-needed reprieve for commercial auto insurers. Commercial truckers saw significantly less accidents with less passenger cars crowding the roads. As a result, the sector may see its best underwriting results in a decade[2].
“Auto insurers, both personal and commercial, may also see positive upticks in results as with courts closed last year, many claims settled more quickly, cost less and/or went to mediation sooner than they would have without Covid-19 shutdowns,” Meg notes.
What’s next? While miles traveled dropped earlier during the pandemic, they have already increased to pre-pandemic levels (despite ongoing remote working and schooling). Trends point to consumers steering clear of mass transportation, including trains and planes, and even ride-sharing services, with the potential for contagions still on their minds. New and used car sales are up (https://www.inquirer.com/business/car-sales-covid-pandemic-increase-20210516.html?). And as more consumers than ever get back on the roads, we can expect implications for claims trends, especially with the height of vacation season upon us. Stay tuned, AAIS is watching this space.
Sources:
[1] https://www.nsc.org/newsroom/motor-vehicle-deaths-2020-estimated-to-be-highest
[2] https://www.mynewmarkets.com/articles/183800/fitch-commercial-auto-insurance-business-could-break-even-in-2021
https://www.insurancejournal.com/magazines/mag-features/2021/05/03/611994.htm
https://www.thezebra.com/auto-insurance/coronavirus-and-car-insurance/
