Why Auto Insurance Prices Are Rising: Dangerous Driving  April 11th 2023

Why Auto Insurance Prices Are Rising: Dangerous Driving

Auto insurance premiums just keep rising as insurers face high costs due to more expensive car repairs and medical inflation — and more dangerous driving.

In mid-2020, crash fatalities started to rise as Americans returned to the roads after months of pandemic lockdowns. It was the beginning of a seven-quarter streak of year-to-year increases in road fatalities, according to data from the National Highway Traffic Safety Administration (NHTSA).

While fatalities have declined slightly in the last two quarters for which data is available, significantly more people are still dying in crashes than before the pandemic. In the first nine months of 2022, the NHTSA reports 31,785 fatalities, compared to 27,019 during the same period of 2019.

A new report from Carrier Management, an information service for the insurance industry, explained that drivers got accustomed to traveling at faster speeds on empty roads in 2020, and simply never slowed down. That trend could be behind the increase in fatalities — and, consequently, higher auto insurance bills.

Has the Gig Economy Dream Ended?

Gig work will still exist, but we won't have a gig economy. We'll have the same old economy, just with more gigs available. 

The announcement that Lyft's founders are leaving the company spurred Wired to say it "signaled the end of the gig economy dream," and I think Wired is right.

The luster has been dulling for a good couple of years now, and it's probably time to reset our thinking. Gig work will still exist. It just won't rewrite the rules of the economy. We won't have a gig economy. We'll have the same old economy, just with more gigs available in it. 

That reset will have implications both for how insurers organize their own work and for what they insure.

The Wired article focuses largely on the "dream" part of the "gig economy dream." It talks about the good vibes that the founders wanted to create when they "recruited anyone with a license, a vehicle and a willingness to affix a pink fuzzy mustache to their car and greet strangers with a fist bump, welcoming passengers into their front seats." The article also describes how the founders wanted to reinvent urban planning by removing the need for "too many parking lots taking up space that could become parks or playgrounds or housing" and hoped to "help many people escape the tyranny of car ownership by letting them use other peoples’ vehicles occasionally instead." The article laments the dashing of those dreams in favor of a new CEO who is solely focused on "the realities of turning a failing enterprise around."

But the article also notes that "we are still learning about the complicated effects of decoupling service work from benefits like health care and sick pay" and, in general, tees up what I think should be broader concerns about the gig economy itself--not just the dreams it was supposed to enable.

Paul Carroll, Editor-in-Chief, Insurance Thought Leadership

"Robinsons" retention could become a major issue for P&C insurers

After a year of record-breaking price increases, many Americans are searching for ways to protect their bank accounts. For insurers, this means even the most loyal of policyholders — those who bundle their homeowners and auto insurance with the same carrier — are at risk of ditching their policies and flocking toward competitors with cheaper rates.

Nicknamed the “Robinsons” by Progressive Insurance, consumers who double down on home and auto policies are a valuable demographic for insurers, and losing them raises profitability concerns in today’s market. That’s because these customers lower the cost of acquisition by offering the chance to sell multiple policies through a single transaction and are consistently among the most loyal — 45% have stuck with their current insurance provider for 11 years or more.

But soaring inflation and the growing popularity of usage-based insurance policies mean insurers need to adapt if they want to keep the Robinsons, and the rest of their customers, on their roster.

Predict & Prevent™: What Commercial Fleet Ought to Know About Telematics and Other Tech Tools That Target Losses

Telematics and crash avoidance technologies are predicting and preventing accidents, making our roads safer.

If you’d asked him ten years ago what technology would revolutionize road safety, Matt Moore, senior vice president with the Highway Loss Data Institute, probably would have said self-driving cars.

Back then, “everyone was writing about how automated driving is going to be the end of the need for automobile insurance,” Moore said.

But predictions are just educated guesses. The promise of vehicles that run on autopilot while the driver monitors their progress and intercedes only in an emergency “have not yet come to pass and the earliest results are saying it might not come to pass,” according to Moore. In fact, 400 vehicles with self-driving capabilities were involved in crashes, between July 2021 and May 2022, per data from the The National Highway Traffic Safety Administration.

While autonomous vehicles haven’t negated the need for auto-insurance just yet, telematics and crash avoidance technologies are making commercial fleets safer by detecting trends in driver behavior, aiding risk managers in making targeted safety programs and warning drivers in situations where a crash might be imminent.

These tools are actually acting on the promise of self-driving vehicles by predicting and preventing accidents. Despite the benefits, commercial fleets are slow to adopt these technologies due to a lack of incentives from insurers and suspicions from drivers who are concerned about how their privacy is affected by cab-facing cameras.

Courtney DuChene, freelance journalist based in Philadelphia

Predict & Prevent™: How a New Generation of Tech Is Mitigating General Property Losses Before They Occur

A raft of new innovations and technologies is advancing the cause of predicting and preventing general property losses.

By the time you smell smoke, it may already be too late.

In scenarios that can lead to property loss — a fire, say, or a frozen pipe — an immediate response can make all the difference. Sprinkler systems, burglar alarms and other technologies that alert us to loss events are critical to mitigating property damage and protecting human lives.

But what does the next generation of property loss tech look like? Could it stop these events before they occur?

Better data collection and artificial intelligence now allow us to scale up our efforts to prevent property damage — to widen the scope of threats we can evaluate, to analyze more data and reveal actionable insights, and to target proactive measures at the property, site or even infrastructural level.

David Agnew, associate editor, Risk & Insurance

NOAA: Ian officially Florida's costliest hurricane

The latest National Hurricane Center report makes it official: Ian was the costliest hurricane in Florida history, with five times the damage totals from 1992′s Hurricane Andrew.

The September 2022 storm struck Southwest Florida as a Category 4 after being downgraded from a Category 5 storm just before landfall. Storm surge heights rose two stories or more, flooding the coast and inland areas with never-before-seen devastation. Ian was responsible for more than $109 billion in damage in Florida, according to the report.

Everything you need to know about parametric insurance

Insurance is one of the few industries that have remained largely unchanged over the past few decades at a low level: You suffer losses as a direct result of something going south, and you get paid by your insurer.

But that old model doesn’t always work. For example, a construction company in a region regularly affected by hurricanes might see its projects surviving these storms mostly unscathed, but it might still see losses in terms of time and other potential costs because crews simply couldn’t make it to work.

Your traditional indemnity policy might pay this company based on the magnitude of its losses but wouldn’t have to pay for those unforeseen, follow-on costs because they aren’t “damages” in the usual sense. One could argue the company is getting the short end of the stick here.

Parametric insurance, on the other hand, ensures that everyone can win. Instead of insuring customers based on the magnitude of the losses incurred, parametric contracts insure customers against the magnitude of events. So in our example, the construction company may see a payout if there is a certain “trigger event,” such as the area is hit by a Category 4 hurricane or higher, or if the wind speed reaches a certain, pre-specified mark.

U.S. P&C insurers resilient despite economic woes: Triple-I

Slow underlying growth and inflation are among the biggest challenges facing U.S. P&C insurers in 2023, suggest analysts at the Insurance Information Institute (Triple-I).

According to Triple-I, P&C saw its cyclical underlying growth rebound fail to materialise in H2 2022 as interest rate tightening depressed housing starts, corporate spending, and vehicle expenditures.

Dr Michel Léonard, CBE, Chief Economist and Data Scientist, Triple-I, commented, “We expect long-term growth to remain below 2% and long-term inflation to remain above 2.5%.

“A recovery by year-end 2023 remains unlikely as the Fed continues its hawkish policy and bond yields increase.

“However, the Consumer Price Index is likely to decrease as pandemic supply chain disruptions ease, and commodity and energy prices reach a precarious war-time equilibrium.”

Triple-I is more optimistic than the U.S. Federal Reserve when it comes to the U.S. Gross Domestic Product (GDP), forecasting the nation’s GDP to grow slightly above Fed expectations between 2023 and 2025.

The firm’s analysts note that macroeconomic fundamentals for P&C insurers are forecast to be mixed for the balance of this year.

How IoT is revolutionizing water-damage mitigation

Water damage is one of the most common and costly insurance claims in the United States. Typically, about 30% of insurance claims are water-damage related claim losses. Of those claims, plumbing or appliance issues are the most common source of the damage , followed by storm and weather-related events.

Insureds must take important steps to develop a plan to minimize the risk of water-damage events and control their severity. An effective plan for water-damage mitigation and emergency response should have three primary focal points: assessment, preparation and isolation.

Assess water intrusion sources.

It is key to understand how water might enter a building and the damages that can occur. The major sources of water damage to buildings include:

Building infrastructure that supplies, removes or uses water such as HVAC equipment with condensate drains, humidifiers, hot water heaters, washers and icemakers. Building construction including exterior walls, doors, windows and the roof. The primary purpose of most buildings is to keep conditioned air inside and prevent water intrusion into the building. Water from outside sources or an unintended inside source. Managing and responding to surface water, back up of sewers and drains, and flood hazards is a key risk control element for a property owner.

Tesla hit with prospective class-action lawsuit over alleged privacy intrusion

A California Tesla owner on Friday sued the electric carmaker in a prospective class-action lawsuit accusing it of violating the privacy of customers.

The lawsuit filed in the U.S. District Court for the Northern District of California came after Reuters reported Thursday that groups of Tesla employees privately shared via an internal messaging system sometimes highly invasive videos and images recorded by customers’ car cameras between 2019 and 2022.

The lawsuit, filed by Henry Yeh, a San Francisco resident who owns Tesla's Model Y, alleges that Tesla employees were able to access the images and videos for their "tasteless and tortious entertainment" and "the humiliation of those surreptitiously recorded."

“Like anyone would be, Mr. Yeh was outraged at the idea that Tesla's cameras can be used to violate his family's privacy, which the California Constitution scrupulously protects,” Jack Fitzgerald, an attorney representing Mr. Yeh, said in a statement to Reuters.