In my two previous editorials we discussed two of the main factors which are affecting insurance premiums. In the first article we went into detail regarding hyperinflation and the spike in cost of the average claim. In the second article we talked about severity. The national weather patterns continue to put pressure on insurance carriers. This article will be my last on why we are seeing historic rate increases. This article will address the third factor affecting our insurance rates, Frequency.
We are in a perfect storm (bad pun alert). Insurance carriers are dealing with all the rising costs and the bad weather patterns while a lot of us are also getting back to the office. COVID-19 turned our professional worlds upside down. We were told to stay at our houses and learn how to work from home. The traffic on the road was minimal and insurance carriers (in some cases) were providing dividends back to insureds due to the quick drop in auto risk. Now four years removed from that fateful Spring most of us are back to daily commutes. According to the Indiana Department of Transportation’s (INDOT) Traffic Count Database System the Volume Trend in the State of Indiana has increased an average of 13% each year between 2021-2023. The more cars back on the road, the more accidents.
As I did in the first editorial, I want to share corroborating evidence that the state and national trends are matching the local trends. Our agency has seen the following increase in claim submissions since 2020.
Year 2021 Claims Reported = 778 23.89% Increase over prior year
Year 2022 Claims Reported = 714 8.23% Decrease compared to prior year
Year 2023 Claims Reported = 866 21.29% Increase over prior year
Increased premiums are the insurance carrier’s response to dwindling money reserves. They have had to react to not only to higher costs when repairing autos and property, but the weather and increased traffic patterns creating significantly more claims. A double whammy to the amount of claim payout dollars from insurance carriers.
We as drivers are not helping the insurance carriers either. The safety features in our cars continue to get more advanced, but distracted driving and riskier driving habits have risen. This has continued to lead not only to more accidents but more severe ones. Fatalities due to auto trend up. The USA Today reported in January that from 2018 to 2022, the number of deadly accidents in the United States increased by more than 16%. In that same article it showed Indiana with a 27% increase since 2019. Way above the national average.
Policyholders are all in this together. Each one of us is feeling the effect of these continued rising costs. If we all do our part to try and mitigate claims that involve the maintenance of our homes and become better drivers we will see rates even out. We can’t control the weather. It’s our duty to try to get better at the other two. If one of these factors happened within a 3-year period, we would see premium increases. The fact that all have happened within a 3-year period is a soup for disaster.
The good news is that we are seeing a better financial picture for our partner insurance carriers. We are headed in the right direction. Hopefully, the light at the end of the tunnel will be daylight.
Matt Hatoway
Matt is a second-generation agency owner. Matt manages Mansfield Insurance Agency in Lawrenceburg. He continues to look for ways to help educate and advise his clients on what is happening in insurance.