Driver and vehicle risk continue to contribute to higher auto claim frequency

ATLANTA, June 20, 2024 /PRNewswire/ -- 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

• 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.

"Auto insurers are navigating a dynamic and challenging market environment in 2024. For their part, consumers are displaying more unpredictable driving and policy shopping behavior, and increasingly switching carriers to find better rates," said Adam Pichon, senior vice president of global analytics, insurance, LexisNexis Risk Solutions. "It is crucial for insurers to balance market acquisition and retention with rate adequacy and utilize data-driven insights to help manage risk and maintain profitability to be set up for continued success as the market begins to soften."

Gen Z drivers and EV technology bring newfound risk

• Both major speeding violations (up 10% from 2022-2023, up 36% since 2019) and minor speeding violations (up 16% from 2022-2023, up 15% since 2019) continue to increase.
• Distracted driving is more prevalent among younger drivers, especially Gen Z. From 2022-2023, violations for the age group increased by 24% and, compared to 2019 figures, have risen 66%.
• Distracted driving across all age demographics rose 10% from 2022-2023.
• In 2023, EV sales grew 54% compared to Light Duty Vehicles (LDVs) sales growth of 13%ⁱⁱⁱ. The total number of EVs insured grew by 40% to 3.9 million in 2023, while the number of private passenger vehicles (PPAs) insured grew by only 1.2% in the same period, to a total of 265 million.
• Regarding consumer EV shopping behavior, 24% of new EV buyers shopped around for lower rates on their auto insurance policies in 2023, significantly higher than the 19% of new PPA buyers that shopped for coverage last year.

Claim severity and complexity continue to rise

• Claim severity continues to challenge the insurance industry as claims severities have steadily trended upward since the pandemic. Compared to 2020, bodily injury has risen by 20%, along with severity as material damage has increased by 47%.
• Attorney involvement has helped contribute to the rise in claims costs. Over half (51%) of claimants who hired an attorney received a higher settlement amount. This activity is most prevalent following an auto accident, as 85% of claimants were approached by one attorney and 60% by more than one.
• The time required to settle a claim is the highest determinant of customer satisfaction, followed by the number of people and touches needed to resolve the claim.
• In 2023, over a quarter (27%) of collision claims were deemed total losses, requiring payouts and consumers to replace a vehicle or find alternate transportation.

Profitability remains a challenge against heightened shopping activity   

• Despite overall combined ratio improvements in 2023, insurers are still working towards profitability in many states with additional rate increases being enacted across the country.
• In response to the record-setting rate increases (9% increase in 2022 and 14% in 2023), traditionally stable consumers have taken to the market to shop their coverage. Among consumers who had auto insurance at the end of 2023, 41% shopped at least once for a new policy. Overall, shopping increased 4.7% in 2023, with many consumers switching carriers, driving new policies up 6.2% in the same period.
• Over 2022-2023, the number of drivers within a policy increased by 5%, pointing to changing risk profiles that may be overlooked during renewal periods and potentially indicating consolidation in households.

Download the 2024 LexisNexis Risk Solutions Auto Insurance Trends Report.