CAS, SOA, PCI Issue First Report on Auto Loss Cost Trends Analysis
In the latter half of 2013, personal auto insurance carriers began to notice an uptick in property damage liability and collision frequency. This marked the beginning of a new increasing frequency trend bucking over 25 years of falling crash rates. While the period of falling frequency preceding this increase was largely attributable to safety awareness, technology, and enforcement, explanations supporting increasing frequency were largely speculative.
In response, the CAS, the SOA and the Property Casualty Insurers Association of America banded together to analyze these trends. Using publicly available data from the Federal Highway Administration, Bureau of Labor Statistics, the Census Bureau, and other sources, an analysis group is searching for explanatory variables. Over two dozen variables were considered within the Lower 48 States and Alaska but excluding the District of Columbia. This paper represents some of their findings around collision frequency, but further analysis is being conducted on frequency trends for other coverages and for severity.
Some of the findings:
- Increase in congestion, as measured by drivers per lane mile and commute times among others, positively correlates to collision frequency
- Mobile broadband access (used as a proxy for the likelihood that a driver may have a mobile device while driving) appears to have no impact on collision frequency.
- The system (no-fault vs. tort) doesn’t appear to impact the expected collision frequency, but has a big impact on the variance of the frequency.
The group’s goal is to provide an analytical basis for discussing and understanding auto insurance loss cost drivers that ultimately affect premiums. Subsequent reports are expected to be released.