Evolving Trends Impacting U.S. Auto Insurance: LexisNexis® Risk Solutions Report  June 21st 2024

U.S. Auto Insurance Trends Report Highlights New Generational Risks in Drivers and Vehicles that Continue to Contribute to Higher Claim Frequencies

Today, LexisNexis® Risk Solutions released its 2024 U.S Auto Insurance Trends Report, which aggregates annual market data about consumer driving patterns, auto insurance shopping trends, claim frequency and severity, and consumer responses to rate increases to help insurance carriers better understand the evolving trends impacting the U.S. auto insurance industry.

Key takeaways

• Distracted driving is more prevalent among younger drivers, especially Gen Z

• Risky driving behavior rises among younger demographics as distracted driving violations by Gen Z increased 24% from 2022 and a staggering 66% in comparison to 2019.

• High claim severities persist due to parts and labor shortages along with rising attorney involvement, with 93% of claimants who sought legal counsel likely to retain services in the future.

• Consumer dissatisfaction around total loss remains high, as roughly half (46%) of auto insurance consumers note frustration with a lengthy claims process.

• Auto insurers are taking an aggressive approach to profitability challenges with an unprecedented 14% year-over-year rate increase in 2023, improving the combined loss ratio to 105i%, a 7-point improvement over 112%ii in 2022.

• Consumers are responding in a big way as elevated rate increases have led to record auto insurance policy shopping and switching levels, with new policies increasing by 6.2% in 2023. Consumer retention rates dropped from 83% to 80%, indicating there may be a need for insurers to focus on their existing portfolios and take steps to update their underwriting practices over the course of 2024.

• Differing driving experiences in electric vehicles (EVs) have contributed to higher and more severe claims than internal combustion engine (ICE) vehicles. In 2023, claim frequency and severity for EVs were 17% and 34% higher, respectively, than traditional segments.

In-vehicle technology can increase distracted driving – Nationwide

Casey Kempton, president of personal lines at Nationwide, discussed the impact of in-vehicle technology on distracted driving in an interview with AM Best.

When asked about current trends in the insurance industry, Kempton highlighted the importance of data.

“Data is essential to how we rate policies, how we understand customers, and how we can engage in the market,” she said.

Kempton noted that the ability to better understand risk and exposure through data is shifting more control to consumers. In the auto sector, the use of telematics to rate good driving behavior is evolving rapidly.

Kempton also addressed the issue of distracted driving, noting that both private-passenger and commercial drivers are concerned about it.

“I do think it's incredibly dangerous, particularly as we're coming into July 4, that is when just the peak of collisions happens and it kind of goes all the way to Labor Day,” she said. “The roads are congested, people need to be aware, they need to be present, they need to put their phones down and focus. People expect that commercial vehicle drivers will not follow so closely, and they will use their turn signals. So, it's not just distracted driving. We all have to drive the best we can on the road to keep us all safe.”

The Hanover Study Finds Homeowners Need Guidance and Support To Properly Maintain Their Homes

According to the 2024 Home Maintenance Report released today by The Hanover Insurance Group, Inc. (NYSE: THG), many homeowners don't know how to properly upkeep and maintain their homes to help avoid significant and costly damage. The report highlights opportunities for improving risk mitigation efforts related to areas susceptible to common losses.

The Hanover commissioned The Harris Poll to survey American homeowners (defined as those who own a house) to better understand their actions to protect their biggest asset and their understanding of high-risk areas in and around their homes. Key results from the study include:

• Homeowners are not focused on the risk of loss from vulnerable areas of the home – Only 38% of homeowners have examined the integrity of their roofs in the past year, and only 39% have checked the condition of their water heaters. Only 40% of homeowners cleaned their gutters. These areas may lead to costly home damage, and should be monitored regularly. Newer homeowners have an opportunity to learn about proper home maintenance – The study found new homeowners who resided in their homes for less than five years are less likely to know where their water shut-off valve is than those who have been in their homes for several years.

• Large home renovation and replacement projects are on the rise - While some homeowners have invested in replacements in the last five years, such as water heaters (38%), HVAC systems (33%) roofs (30%), windows (20%) and electrical systems (19%), about one-third of homes are due for large project updates including replacing roofs and windows to help protect them from Mother Nature.

• Maintenance varies by location - There are regional differences in the maintenance done in the past year by homeowners. Homeowners should consult with their agents to understand the most vulnerable areas of a home based on their location.

  • Midwest homeowners, are more likely to have cleaned out their gutters in the past year than those in the South and West.

  • Southern and Midwestern house owners are more likely than Northeastern house owners to have checked HVAC systems in the past year (64% each vs. 48%).

  • Northeast house owners are the most likely to have changed smoke detector batteries (71% vs. 55% South, 59% Midwest and 60% West) and are more likely than those in the South and Midwest to have checked their water heaters.

"As weather becomes more severe and risks evolve, homeowners play a key part in helping to protect their most precious investment," said Dan Halsey, president of personal lines at The Hanover. "Homeowners don't want to experience the stress and disruption from a loss. Taking care of their property gives them more control over the impact unpredictable weather can have on their homes. Together with a knowledgeable independent insurance agent to guide them, consumers can ensure they have the right insurance protection and the right maintenance routine to help preserve their homes for years to come."...

Rising jury verdicts and insurance gaps a struggle for companies: Chubb

As large jury verdicts increase in number and cost, many companies do not have adequate liability insurance to cover these losses effectively, a recent analysis by insurance company Chubb has revealed.

According to Chubb’s 16th annual Liability Limit Benchmark & Large Loss Profile by Industry Sector 2024, there is a widening gap between the escalating verdicts and the insurance coverage available.

This disparity is especially pronounced in cases involving “nuclear verdicts,” which are settlements or awards exceeding $10 million, highlighting companies’ consistent underestimation of their required liability coverage.

In 2022, the amount of large jury verdicts against corporate defendants soared to $18.3 billion, a staggering 273% increase from $4.9 billion in 2020.