Auto Insurance Rates Climb at Fastest Rate Since 2003
Americans are driving more, thanks to rising employment and cheaper gasoline. But that also means they’re getting into more accidents — and that’s leading to higher insurance rates. Of course, it’s not just a matter of more people cruising the roads. Unsafe behavior also may be contributing to a national accident problem, according to research released by the AAA Foundation for Traffic Safety. A February report by the group found about 87 percent of drivers engaged in at least one risky behavior while behind the wheel within the past month, including using cell phones or not wearing seat belts, but that’s not the only thing boosting rates.
The size of claims — which in industry lingo is called “claims severity” — is trending higher and affecting several auto insurance companies. Rising costs for medical care and auto repair are big drivers of increasing claims severity. The increasing price of auto parts contributes as well. But critically, there are more personal auto claims as a result of Americans driving more miles. That trend, which is closely watched by industry analysts, can hurt the profitability of the insurance companies.
From 2005 to 2013, figures show the average cost per paid bodily injury liability claim increased 32 percent, from $11,738 to $15,506, according to the Insurance Research Council. In 2014 it had reached $16,600, up 7 percent over the 2013 average payout.
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