Auto Insurance: Light at The End of The Tunnel? Not yet.

Written By: Mark Mendes, Risk Management Leader at SeibertKeck Insurance Partners

Auto insurers are facing a litany of disastrous societal trends that have increased claims costs in every way possible and look to be getting worse instead of better. To wit:

1. Cars are not only more expensive, but they are also more fragile, as the array of sensors that surround our cars are easily damaged in even a minor collision. And these sensors are very expensive to replace and install.

2. All those lawyer billboards encouraging people to sue has created what is called social inflation, which is when we insist, through our jury verdicts, that claims covered by insurance be rewarded far more generously than they would be otherwise. Insurance companies have unlimited funds, so “why not stick it to them when we get a chance” seems to be our new ethic.

3. Speeding has gotten to the point where I am not at all surprised when I am passed on I-71 by multiple cars traveling in excess of 100 miles per hour. Nowadays if you’re driving slower than 70 mph you run the risk of being run off the road.

4. Oh, and those expensive sensors turn out to cause as many crashes as they prevent. And the accidents they cause are far more serious. The only safety feature recently added to our vehicles that actually seems to work to reduce accidents is the braking feature that prevents colliding with the car in front of you.

5. Despite societal warnings against urban sprawl, we continue to move farther away from one another, greatly increasing overall miles driven, which has a direct negative impact on accident statistics.

6. And it seems that none of us can drive without multiple screens vying for our attention when we should be paying attention to the road in front of us. Even a hands-free conversation is hazardous when it becomes animated, which many unfortunately do.

7. Lastly, those natural disasters that seem to befall those of us who insist on living in sight of the ocean impact auto insurance costs more than people realize. In many disasters the cost of the vehicles lost is more than the damage to structures. And the perils of flood and earthquake are never excluded on an auto insurance policy, as they can be on dwellings. And around here hail claims have skyrocketed from all the violent storms our weather is so good at producing.

8. Of course, this all has had an impact on the underwriting results of the carriers we represent, some of which have reported combined ratios exceeding 130% in commercial auto. This is the kind of result that causes carriers to stop writing auto altogether, lest they risk insolvency. If it weren’t for other more profitable  commercial lines supporting their auto writings, many would. 

Insurance companies aren’t perfect. But when one goes out of business leaving policyholders in the lurch the outcry can be heard on the moon.