I wanted to give you some insight into what we’re seeing and share some factors that may impact your auto insurance rates.

To start with, let’s compare the auto insurance industry overall in 2015 with 2006: In 2006, the industry auto loss ratio was 69.7% ( for every dollar collected in premium, 69.7 cents was paid out in claims). In 2015, the loss ratio has jumped to 80.2%. What's driving the increase? More cars are on the road. Drivers are more distracted. Cars are more expensive to replace.

Here are a few statistics the entire auto insurance industry is experiencing:

3.148 trillion miles were driven in 2015. That’s a 3.5% increase over 2014 — the largest annual increase in 25 years.[1]

More miles driven equals more cars on the road which leads to a higher probability of accidents, and we’ve seen just that with a higher accident frequency.

Traffic deaths decreased 22% from 2000 through 2014. Estimations for 2015 show a 7.7% increase over 2014.[2]

You read that correctly. After a steady 14-year decline, traffic deaths jumped which matches an increase in accident severity that we’ve seen. Claims are also more costly. For example:

The average cost of bodily injury claims rose 32.1% between 2005 and 2013.^[3]

Part of this increased cost is due to increased accident severity. The cost of medical care is also rising, and vehicles are more costly to repair because they include more technology like sensors and backup cameras. A few years ago, there were only a few cars with these safety features on the road, now they’re becoming standard:

The U.S. set a new car sales record of just under 17.5 million vehicles in 2015, up 5.7 percent from the year before.[4]

Newer cars are more expensive to replace because what used to be a minor bumper replacement on an older car now involves replacing those sensors and cameras as well.

With the improving economy and lower gas prices, more people are choosing to drive. Drivers are also more distracted than ever.

The National Safety Council estimates one in four car crashes involves cell phone use.

A recent AAA report shows 87% of drivers engaged in some kind of risky behavior behind the wheel. 70% of drivers admitted they talk on a cell phone while driving and 42% said they read texts or emails while driving.

If you’ve been following the news this year, you’ve noticed a few stories mentioning some of these statistics and tying them to increasing auto insurance rates. Carriers will likely respond to this growing rate need differently, but based on industry results we do anticipate the industry will need to respond.

If you have your auto insurance with a carrier that has increased your insurance rates due to any of the factors outlined above, now would be a great time to contact First Dependable Insurance for a quote. As an independent insurance agent we represent a dozen different auto insurance carriers (One of which will be perfect for you).

Blog post based on original article drafted by John Mileski, senior vice president of agency field operations at Safeco Insurance

Sources:

[1] U.S. Department of Transportation’s Federal Highway Administration

[2] National Highway Traffic Safety Administration

[3 Insurance Research Council

[4] Strategy& Price WaterHouse Coopers, 2016 Auto Industry Trends