Insurance Information Institute Auto Insurance Subcommittee August 10 2016 1 About PCI 1000 insurance company members 202 billion premium 35 of PampC market 2 FIO Auto Data Call ID: 713207
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Slide1
The Changing Auto Safety Landscape
Insurance Information InstituteAuto Insurance SubcommitteeAugust 10, 2016
1Slide2
About PCI
≅1,000 insurance company members
$202 billion premium
35% of P&C market
2Slide3
FIO Auto Data Call
Dodd Frank Act
FIO shall monitor access that “minorities and low and moderate income persons (LMI)” have access to affordable insurance.
FIO Focus: Auto insurance affordability
Proof of financial responsibility (insurance) required to drive
Driving important for employment
Auto insurance is widely available
Multi
-year processFIO issued multiple requests for comment; numerous meetings Insurers opposed artificial % of income and direct data callsInsurers recommended measure affordability in context of other household expenses; refocus on cost drivers
3Slide4
Good, Bad and Ugly
Good: Public data sources this year; next year = aggregating data through stat agencies (protects privacy/confidentiality)Focus on minimum mandatory liability
Bad: Artificial thresholdLack of contextFuture possibility of direct insurer data calls
Ugly:
Fails to address escalating loss costs
What the threshold could be used for
4Slide5
Affordability Debate Needs More Context
5
Sources: PCI using data from WARD’S Facts & Figures; NAIC – Liability Insurance; Audatex - Repair Cost;
Experian Automotive - Used Car PaymentSlide6
An artificial affordability index completely misses the mark and ignores the ballooning public safety crisis
6Slide7
Increasing Auto Losses –A Public Safety Crisis
National Highway Traffic Safety Administration (NHTSA)
7.7% auto deaths in 2015 vs. 22% decrease from 2000-2014
35,200 fatalities
3.7% increased death rate per
100 million miles traveled
National Safety Council (NSC)
8% increase in auto deaths in 2015
- vs. 3% decline in 2013 and 0.5% increase in 2014Largest increase in last 50 years7Slide8
8
7.7%Slide9
9
Auto injuries up 26% since 2009
Source: National Safety Council, Medically consulted auto injuries, indexed by PCI
%Slide10
10
P/C: Deteriorating Trends
Q1 2015 to Q1 2016
2015
Level
-2%
+1%
+6%
NWP
DWPSlide11
11
Investment ResultsSlide12
Personal Lines Deterioration (Q1)
12
HO
10.8%
Slide13
13
Source: SNL Financial;
2015 inflation adjustment by
PCI
using CPI; indexed by PCISlide14
The End of Auto Insurance?
14Slide15
A Mismatch of Perception & Reality
Perception“Technology is making cars safer, so why isn’t my premium going down? ”Reality More accidents = More claims
Claim costs are rising 15Slide16
Auto Trends: Flat LT Frequency
16Slide17
Nationwide VEHICLE DAMAGE Claim Frequency and Severity – Causing Significant Deterioration of Insurance Loss Costs
% Change since 2010
Vehicle Damage = PD Liability + Collision coverages.
Data points reflect year-end, rolling four quarters.
17Slide18
Nationwide INJURY Claim Frequency Has Been Rising
Since End of 2014, Contributing to Higher Growth in Loss Cost
% Change since 2013
Injury data reflect Bodily Injury Liability (non-no-fault states) + Personal Injury Protection (no-fault states).
All data points reflect year-end, rolling four quarters.
11.1% increase
7.2% increase
3.6% increase
Since 2013:18Slide19
States with Highest and Lowest
Vehicle Damage Frequency Changes
19
Highest Frequency Change
Lowest Frequency Change
The above two groups of 10 states each have the highest and lowest PD Liability + Collision frequency changes from Year-Ending 2013(4) to Year-Ending 2015(3).
Highest Change states are mostly along the Atlantic;
Lowest Change states are
mostly in the Upper Midwest and Mountain regions
11.6%, DC
7.1%, MA
6.8%
7.6%
7.7%
6.6%
7.3%
6.9%, MD
-14.0%
-6.5%
-1.9%
-1.5%
-1.7%
-0.3%
-2.2%
-0.4%
-0.5%
-0.7%
5.9%, RI
5.5%Slide20
Severity Trends are Similar Between Highest & Lowest Groups:
The Rising Frequency in States with Highest Freq. Changes
is Helping to Drive their Large Growth in Loss Cost
% Change since 2013
Highest Freq. Changes
Lowest Freq. Changes
% Change since 2013
14.7% Change
-1.9% Change
6.0% Change
Data points reflect year-end, vehicle damage coverages.
20Slide21
Auto Claim Frequency/Severity Factors
Strong correlationsMiles driven/EmploymentTraffic congestion - Distracted DrivingAdditional factors
Demographics - Older and younger driversWeather Events Road ConditionsDrugs (Marijuana, Opioids) Severity factorsVehicle technology and materials
Increasing medical costs
Speed Limits
21Slide22
Traffic Congestion: Urban Travel Growing Faster in High Frequency Growth States
22
Growth in Urban Miles Traveled per Urban Lane MilesSlide23
23Slide24
Distracted Walking Visits to ER
24Slide25
Correlation among Lower Gasoline Prices, More Miles Driven and Accident Claim Frequency
% Annual Change
Claim frequency fell in 1997-1998, 2001-2002 and 2009 despite lower gasoline prices.
* Last data point: Changes in claim frequency and miles driven reflect first 3 qtrs. of 2014 to first 3 qtrs. of 2015.
Change in gasoline prices reflects 2014 to 2015 (entire years).
Stronger dollar;
oil prices dropped.
More fuel efficient cars; boom in North American crude oil.
Falloff in consumer demand after 9/11; oversupply of gasoline. 25Slide26
More Miles Traveled in States with Higher Claim Frequency Growth
26Slide27
Wet Weather in the South Drives Frequency In 2015
States include FL, GA, IN, MS, SC and TX; all are in the group with the highest claim frequency growth in 2015(2) [compared to 2013(2)] and have above avg. precipitation during this quarter.
PD Liab. & Coll. Claims
per 100 Ins. Cars
27Slide28
Impact of Marijuana in Colorado
28Slide29
Colorado Traffic Deaths Related to Marijuana*
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*Number of Fatalities Involving Operators Testing Positive for Marijuana
Source: National Highway Traffic Safety Administration, Fatality Analysis Reporting
System (FARS), 2006-2013 and CDOT/RMHIDTA 2014Slide30
Key Findings
30
Figure 1.
Quarterly average proportion of drivers involved in fatal crashes who were positive for THC and modeled seasonally-adjusted linear trend before and after Washington Initiative 502 took effect on 6 December 2012 legalizing recreational use of marijuana for adults aged 21 years and older, Washington, 2010 – 2014
Data: Washington Traffic Safety Commission, 2010 – 2014.
Drivers positive for THC based on results of blood toxicological tests. Results imputed 10 times when driver was not tested or test results were unknown; results reflect averages from 10 imputed values for each driver. Model-based predictions are from binomial regression model with identity link function, indicator variables for seasons, and a two-part linear spline with change in slope on 5 September 2013 (39 weeks after effective date of Initiative 502)
Findings and graphs from AAA Traffic Safety Foundation.Slide31
Opioid Prescriptions Quadrupled Since 1999 -- Significant (3x) Differences in State Prescription Rate
31
Source: MMWR Vital Signs, July 2014. Source: IMS, National Prescription Audit (NPATM), 2012. Findings and graphs from AAA Foundation for Traffic Safety.Slide32
Speed Limit Impact on Traffic Deaths: Significant
No. of Speed-Related Deaths
UT changes, eff. 2013 and 2014
WY change, eff. 2014
‘10
‘11
‘11
UTAH
WYOMING
32Slide33
33
Speed Limit Increase Impact on Accident Frequency: Unclear/Mixed
Note: States that raised their speed limits since 2013 are AK, GA, ID, IL, KY, ME, NH, NC, OH, PA, SD, UT and WY. Those that changed in 2015 are not included since their new limits have been in effect for only a short time.
States with same limits did not make any changes during 2011-2015. Slide34
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Note: States that raised their speed limits since 2013 are AK, GA, ID, IL, KY, ME, NH, NC, OH, PA, SD, UT and WY. Those that changed in 2015 are not included since their new limits have been in effect for only a short time.
States with same limits did not make any changes during 2011-2015.
Speed Limit Impact on Severity: Slight IncreaseSlide35
Uninsured Motorist Bodily Injury/Property DamageLoss Experience Has Grown Since 2012
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9.0%
6.7%
2.1%
Source: PCI using projected Independent Statistical Service claims data
% Change since 2012Slide36
Auto Medical Increasing + Worse than Medical CPI
36
7.3%
6.7%
5.1%
Sources:
1. Auto: Fast Track Monitoring System
2. Medical CPI: Bureau of Labor Statistics
% Change since 2013Slide37
PCI Raises
Awareness37Slide38
38
Media OutreachSlide39
Congressional/Legislative Activity
PCI Supporting Passage/Implementation of the FAST ActHouse and Senate letters to the Department of TransportationCongressional hearings and PCI Hill briefings
Appropriations progressPCI Study of Distracted Driving Laws/GapsIdentify and update state laws where distracted driving is not a primary offense or where the laws do not clearly encompass smart (“dumb”) phones
State Auto Safety Legislation
Working with auto safety advocates and insurers to improve state laws and prevent rollbacks of existing laws.
39Slide40
We Need Your Leadership!
Be vocal policy leaders in your stateLaws/enforcement vs distracted drivingRobust drunk/drugged driving limits
Licensing renewalsHelp identify and highlight causal factors
40Slide41
Support risk based pricing / actuarial rates
Sends accurate price signalsEnsures availabilityEducation:Help legislators & public understand trendsEncourage better broadcast warnings
Distracted driving (Pokémon Go)Bad weather caution/closings
41
We Need Your Leadership!