Insurance Claims News and Information

Insurance Trends on the Horizon for Auto Personal Injury Claims

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By Tamara Flinn, ISO Claims Partners

New York, NY (Dec. 30, 2016) – Looking forward to future Auto Physical Damage and Injury trends, there is a common theme. In the short term, the number of accidents WILL decrease, but loss costs and severity will continue to rise in the near future. The use of autonomous vehicles is likely to be a major contributing factor to that trend. Also, new and improved safety features should not be overlooked as a major contributing factor. The fact that severity has steadily increased over the past decade should not be discounted.

Why is that?

Safety comes with a price. Some of the better safety technology is just down right expensive. To put it in perspective, when a new vehicle is an auto accident today, the cost of repair has jumped to approximately $800 per U.S. citizen.

Medical costs continue to rise as they have for years. Again, new technology is one factor in that trend. Harvard professor David Cutler states technology is the underlying price driver in healthcare, which means improving medical technology will lead to higher healthcare expenses. This is one explanation for rising loss costs. When you factor in that the majority of auto accidents involve a minor to moderate injury associated with them, the cost for injury claims will continue to rise. Let's review the current statistics on accidents involving injuries.

The National Highway Traffic and Safety Administration (NHTSA) measures injury severity by the Maximum Abbreviated Injury Scale (MAIS), which represents the "threat to life associated with an injury" and has the following definitions(1):

  • MAIS0 – No injury caused by accident
  • MAIS1 – Minor
  • MAIS2 – Moderate
  • MAIS3 – Serious
  • MAIS4 – Severe
  • MAIS5 – Critical
  • Fatal (MAIS6) – Not survivable

Source: NHTSA(2)

Over 30% of all automobile claims fall into the minor or moderate injuries category with a surprising number of fatalities versus severe injuries.

Is investing in safety worth it?

As noted by the Hanover Research Firm, "The economic costs are a subset of total costs and refer to the tangible and measurable costs associated with vehicle accidents including but not limited to "productivity losses, property damage, medical and rehabilitation costs, congestion costs, legal and court costs, emergency services, insurance administration costs, and the costs to employers." In light of these numbers, the current U.S. Secretary of Transportation Anthony Foxx concluded "investments in safety are worth every penny" to lower the frequency and severity of vehicle accidents."(3)

Can we control medical costs?

Although Property and Casualty insurers cannot directly impact the cost of medical care, there is work being done to try and reduce these costs throughout the medical community. For example, the U.S. government seeks to reduce medical costs by eliminating wasteful spending (around 33 percent of medical spending is not associated with improved outcomes) and by incentivizing consumers to make conscious healthcare decisions, while also increasing price transparency on the market. Another method to rein in costs is to establish value-based compensation.(4)

How do Insurers get ahead?

"One-third of all insurers are unprepared for this change."(5) Given that loss costs are decreasing, Insurers will have to meet the demands of the marketplace which will expect lower premiums period. With severity on the rise and the introduction of autonomous vehicles, some of this cost will shift to commercial carriers. Although autonomous vehicles are to be praised for some of this, trends will lean towards insuring manufacturers of autonomous vehicles and to ride sharing, placing these more into the Commercial area versus personal auto.

Stay tuned for our next webinar to determine WHAT is still causing all these accidents and how to prepare for coming changes in the trends that will profoundly impact the auto insurance arena.

Notes

1. Trauma.org. “Abbreviated Injury Scale.”

2. PBS Newshour: The Rundown: “Why does health care cost so much in America?

3. National Highway Traffic Safety Administration (NHTSA), “New NHTSA Study Shows Motor Vehicle Crashes Have $836 Billion Economic and Societal Impact on U.S. Citizens,” Op. cit.

4. Ibid.

5. KPMG white paper: “Automobile Insurance in the Era of Autonomous Vehicles.” October 2015.

About ISO Claims Partners

ISO Claims Partners provides Medicare compliance and claims resolution services to many of the largest property/casualty insurance companies, as well as self-insured companies and third-party administrators. The services help our clients meet their obligations under state and federal laws — while also reducing claim costs, expediting settlements, and improving efficiency.

We also provide protocol design and settlement consultation services to help your organization resolve claims quickly and efficiently.

For more information, visit www.verisk.com/iso/claims-partners.html.

About the Author

Tamara Flinn is the director of Product Management for ISO Claims Partners. She has more than 20 years of experience in Property and Casualty Insurance with a focus on personal auto as well as claims software implementations. Her current role is Product Manager for Liability Navigator where she is charged with keeping up to date on all things auto and injury related as well as looking forward to future trends in the personal and/or commercial auto field. Tamara is based out of Columbia, South Carolina, and can be reached at [email protected].

Source: ISO Claims Partners


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