Auto insurance claims down, but rates aren’t

Auto insurance claims down, but rates aren’t

Drivers are making fewer auto crash claims to their insurers creating, dare I say, “windfall” profits. The insurers are baffled why the drop, especially since they do such sophisticated statistical models to predict claims and payouts. I’m baffled too, since we’ve been told over the past five years that we need to ban people from talking on cellphones because they cause so many accidents. Plus we’ve been told we need to ban all kinds of other technology from the car, too, like iPods and GPS and satellite radio and DVD players, because they’re also distracting, as is eating while driving and even talking to passengers. (Not sure if they’ll be able to ban that one.) Of course, teen drivers are causing a lot of accidents, we’re told, because, well, they’re teens. And then there are those massive SUVs which apparently cause accidents by being big behemoths no one can see around and take great anthropomorphized delight in crushing the puny sedans around them.

Yet, like I said, there aren’t more accidents, but fewer. Huh. Could it be that all those warnings in the mainstream media was all just a bunch of ratings-generating, ad-selling hype perpetrated by nanny-government activists and pandering politicians?

But Mr. Renwick said there’s no mistaking the buzz. Industry-wide, auto-collision claims fell from 6.91 claims per 100 insured vehicles in 2001 to 5.91 claims per 100 insured vehicles in 2005, according to the Property Casualty Insurers Assn. of America.

... In the past, insurers have seen claim filings rise and fall, but they’ve never seen such a protracted trend. And, unlike in past eras when improved margins led insurance companies to cut premium rates, rates today are falling only modestly, if at all.

Speaking of those “windfall” profits and premiums that aren’t coming down, since government actually sets those rates, at least here in Massachusetts, this is a case where politicians should intervene to end the gouging of the consumer. I would prefer a free-market system of competition among insurers, but absent that, the politicians should stop counting the donations from the auto-insurance industry’s lobbyists for a moment to give their constituents a break. Yeah right, I couldn’t keep a straight face while typing it.

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  • Well, maybe one reason there are “fewer” accidents, at least from the insurance companies’ perspectives, is that many Americans will just go ahead and pay for the dings or whatever to be taken care of if it’s a minor, low-speed fender-bender. Fixing the materials used in cars today is easier than in past years, if no major surgery is required, so you *can* pay for it. Most people I know would rather pay $500 or even $1000 to have things fixed themselves (or for someone else if it’s their fault), than to have to go to their insurance company. Because even if it’s not your “fault”, and even if you’re a good, healthy driver otherwise, if you report a claim, your premium *will* go up. God knows the auto insurance companies don’t have the money otherwise!!! Now, I’m an advocate of the free market, but there’s a point where paying X for major coverage, *and* then being penalized when you use the coverage, turns into gouging. (A whole different problem opens up when politicians then try to set the rates – another topic, another time.)

    Somehow I don’t think this aspect is being taken into account in those sophistimacated statistical models.

  • One important factor in insurance profits is interest rates. They went down in the period 2001-5. Of course they are now going up and this should cut their costs.

    Also, a reduction in claims of 14% over a 4 year period may simply offset inflation

  • Oh, yes, there are just hundreds of Insurance Companies dying to get after those high profits in Mass Auto—- NOT! Mass Auto is an over-regulated disaster, always has been, always will be. Insurance profits move in cycles. Go look at the historical rate of return in writing Mass Auto, especially personal Mass Auto. It’s the way to take a large pile of capital to a small pile of capital real fast.

    Insurance Underwriter.

  • Charles—

    It’s not a 14% reduction in the dollar value of claims, but a 14% reduction in the number of claims filed.

  • Brian,

    That’s my point. A 14% drop in claims can be offset by a 14% (over 4 years) increase in costs per claim, leaving total costs flat.

  • In Massachusetts, we have no fault insurance so everyone gets to pay and then get dinged with higher rates.

    Hey, I thought Tom Reilly promised us lower rates so we wouldn’t need to be (gasp) deregulated?!

    Also, at least one insurance company is going to rate your vehicle on how big it is.  An SUV which may keep your family safer?  Well, sorry, your insurance will cost more because your SUV will also cause more damage to the tiny car the other guy was driving.