Private Passenger Auto Insurance Trends in Georgia

Transcription

1 Private Passenger Auto Insurance Trends in Georgia Frequency & Severity on the Rise Georgia House Insurance Committee Atlanta, GA January 11, 2017 Download at Robert P. Hartwig, Ph.D., CPCU Special Consultant Insurance Information Institute and Clinical Associate Professor of Finance Darla Moore School of Business University of South Carolina Tel:

2 A Few Factors Driving Adverse Private Passenger Auto Loss Trends More Jobs, Better Economy, More People Driving, Lower Gas Prices, Higher Speed Limits 2

3 America is Driving More Again: Percent Change, Miles Driven* 3.5% 2.5% 2.5% 2.1% 1.8% 2.5% 3.4% 2.9% 1.5% 1.2% 1.3% 0.5% 0.8%0.8% 0.6% 0.4% 0.6%0.6% -0.5% -1.5% -2.5% -1.8% -0.7% -0.5% Fastest Growth Since Tremendous Growth In Miles Driven. The More People Drive, The More Frequently They Get Into Accidents. * : Moving 12-month total vs. prior year data through Oct. 2016, the latest available, vs. Oct Sources: Federal Highway Administration; National Bureau of Economic Research (recession dates); Insurance Information Institute.

4 06:Q1 06:Q3 07:Q1 07:Q3 08:Q1 08:Q3 09:Q1 09:Q3 10:Q1 10:Q3 11:Q1 11:Q3 12:Q1 12:Q3 13:Q1 13:Q3 14:Q1 14:Q3 15:Q1 15:Q3 16:Q1 Why Are People Driving More Miles? Is it Jobs? :Q2 Billions of Miles Driven in Prior Year 3,200 Recession 3,150 3,100 3,050 3,000 2,950 2,900 2,850 Miles Driven (left axis) # Employed (right axis) Millions Employed , People Drive to and from Work and Drive to Entertainment. Out of Work, They Curtail Their Movement. Sources: Federal Highway Administration; Seasonally Adjusted Employed from Bureau of Labor Statistics (Series ID CES ); Insurance Institute for Highway Safety; Insurance Information Institute.

5 06:Q1 06:Q3 07:Q1 07:Q3 08:Q1 08:Q3 09:Q1 09:Q3 10:Q1 10:Q3 11:Q1 11:Q3 12:Q1 12:Q3 13:Q1 13:Q3 14:Q1 14:Q3 15:Q1 15:Q3 16:Q1 More People Working and Driving => More Collisions, Number Employed, Millions Number Employed (left scale) Recession Collision Claim Frequency (right scale) There are not only more accidents, but accidents per 100 insured vehicles is up too. This is what matters to insurers. Overall Collision Claims Per 100 Insured Vehicles When people are out of work, they drive less. When they get jobs, they drive to work, helping drive claim frequency higher. Sources: Seasonally Adjusted Employed from Bureau of Labor Statistics; Rolling Four-Qtr Avg. Frequency from Insurance Services Office; Insurance Information Institute. 5

6 More Miles Driven More Collisions, :Q2 06:Q1 06:Q3 07:Q1 07:Q3 08:Q1 08:Q3 09:Q1 09:Q3 10:Q1 10:Q3 11:Q1 11:Q3 12:Q1 12:Q3 13:Q1 13:Q3 14:Q1 14:Q3 15:Q1 15:Q3 16:Q1 Billions of Miles Driven in Prior Year 3,200 3,150 3,100 Recession Miles Driven (left axis) Collision Claim Frequency (right axis) Overall Collision Claims Per 100 Insured Vehicles ,050 3,000 2,950 2,900 2,850 2, The More Miles People Drive, the More Likely They are to Get in an Accident, Helping Drive Claim Frequency Higher. Sources: Federal Highway Administration; Rolling four-quarter average frequency from ISO, a Verisk Analytics company; Insurance Institute for Highway Safety; Insurance Information Institute.

7 06:Q1 06:Q3 07:Q1 07:Q3 08:Q1 08:Q3 09:Q1 09:Q3 10:Q1 10:Q3 11:Q1 11:Q3 12:Q1 12:Q3 13:Q1 13:Q3 14:Q1 14:Q3 15:Q1 15:Q3 More Miles Driven => More Collisions, :Q4 Billions of Miles Driven in Prior Year Miles Driven (left axis) Recession Collision Claim Frequency (right axis) Overall Collision Claims Per 100 Insured Vehicles The more miles people drive, the more likely they are to get in an accident, helping drive claim frequency higher. Sources: Federal Highway Administration ( ); Rolling Four-Qtr Avg. Frequency from Insurance Services Office; Insurance Institute for Highway Safety; Insurance Information Institute. 7

8 Why Are People Driving More Miles? Cheap Gas? 06:Q1 06:Q3 07:Q1 07:Q3 08:Q1 08:Q3 09:Q1 09:Q3 10:Q1 10:Q3 11:Q1 11:Q3 12:Q1 12:Q3 13:Q1 13:Q3 14:Q1 14:Q3 15:Q1 15:Q3 15:Q4 Billions of Miles Driven in Prior Year 3150 Miles Driven (left axis) Recession Gas Prices Avg. Price Per Gallon $ $3.5 $3.0 $2.5 $ $1.5 Gas Prices Don t Seem Correlated With Miles Driven. Sources: Federal Highway Administration ( ); Energy Information Administration; Insurance Institute for Highway Safety; Insurance Information Institute. 8

9 Comparing Gas Prices, Employment on Collision Frequency Freq Gas price vs. Collision Frequency Freq Number Employed vs. Collision Frequency Gas Price/Gal. Employment Level Sources: Seasonally Adjusted Employed from Bureau of Labor Statistics; Energy Information Administration; Rolling Four-Qtr Avg. Frequency from Insurance Services Office; Insurance Information Institute. 9

10 US Pvt. Passenger Auto Net Combined Ratio, % 105% 100% 95% 90% 95.1% 95.6% 98.3% 100.2% The increase in frequency and severity of claims is driving up insurer payouts relative to premiums 101.3% 101.0% 102.0% 102.1% 101.6% 102.5% 104.6% 85% Loss Ratios Have Been Rising for A Decade Return on Net Worth Is Likely Close to Zero or Negative. SOURCE: National Association of Insurance Commissioners data, sourced from S&P Global Market Intelligence; Insurance Information Institute. 10

11 Return on Net Worth: Personal Auto, * 18% 16% 14% 12% 10% 8% 6% 4% 2% Rising claim costs has been a factor in keeping auto insurer ROEs quite low 13.3% 4.2% 0% * Personal Fortune 500 Auto Insurance Profitability Remains Well Below Pre-Crisis Levels (12% vs. ~4%) *2016 Personal Auto figure is estimated. SOURCE: National Association of Insurance Commissioners. 11

12 Auto Fatalities Are Rising Fatal Auto Accidents Are Rising Faster in Georgia at Nearly 3 Times the Rate Nationally 12

13 U.S. Annual Change in Automobile Deaths, * -7.0% -5.9% 2.2% 1.5% 2.0% 0.7% -0.4% 0.1% -2.5% 2.2% 1.0% 3.6% -1.4% 0.4% 0.9% -0.1% -3.0% -9.5% -9.0% -2.4% -0.1% 3.1% -2.9% 0.1% 8.0% 9.0% Annual Change (%) 10% Sharp increase in use of seatbelts Steep drop due to less driving during the Great Recession Motor vehicle deaths saw their largest increase in 50 years in % 0% -5% -10% -15% Driving Has Been Getting Safer For Decades, But Recent Trend Is Discouraging 38,300 Deaths in 2015 and Likely More in * *2016 data are though June 30. Source: National Safety Council. 13

14 Georgia Highway Fatalities, ,800 1,600 1,400 1,200 1, ,647 1,508 1,299 1,250 1,236 1,199 1, Deaths = +22.4% in 2015 Highway deaths in Georgia are now at their highest level since ,170 1, Deaths = +7.3% in , Highway fatalities are surging in Georgia, with no end in sight Sources: Georgia Department of Transportation accessed 1/9/17 at

15 Change in Auto Fatalities by State: Especially Severe in Georgia 2015 vs GA s auto fatality rate has increased at a pace nearly 3 times that of the US overall and far in excess of any other state in the region 22% GA (1,394) 16% SC (954) 12% KY (748) 11% NC (1,396) -1% 7% 8% Fatalities in Southeast Rising Faster than USA as a Whole USA (38,300) VA (755) TN (961) -5% 0% 5% 10% 15% 20% 25% SOURCE: Estimates from National Safety Council.

16 Change in Auto Fatalities by State: Especially Severe in Georgia First 6 Months 2016 vs. First 6 Month 2014 GA s auto fatality rate has increased at a pace nearly double that of the US overall 34% GA (701) 26% NC (668) 13% 11% 18% 25% 24% Fatalities in Southeast Rising Faster Than USA as a Whole SC (458) KY (373) U.S. (19,100) VA (348) TN (502) 0% 10% 20% 30% 40% SOURCE: Estimates from National Safety Council.

17 Private Passenger Auto Profitability in Southeast States vs. US Georgia is a Profitability Laggard in the Region and Among the 50 States 17

18 RNW PP Auto: NC, SC and GA vs. U.S., % 12% 10% Average US: 6.2% NC: 6.4% SC: 5.8% GA: 4.7% 8% 6% 4% 2% 0% -2% -4% US NC SC GA Source: NAIC. 18

19 RNW PP Auto: TN, FL, MS, AL vs. U.S., % 15% 10% 5% 0% -5% -10% -15% -20% -25% Average US: 6.2% AL: 6.7% TN:5.8% GA: 4.7% FL: 3.9% MS: 3.6% US TN FL MS AL GA GA s pvt. Passenger auto market is the least profitable in the region Source: NAIC. 19

20 Private Passenger Auto Frequency & Severity Trends in Georgia vs. Southeast States and US Frequency, Severity and Loss Ratios Are Up in Georgia 20

21 Georgia Coverage: BI Severity & Frequency Trends Are Both Higher in Recent Years* 0.2% 4.2% 6.6% -5.7% 8.5% -5.2% 5.4% -0.9% 4.5% 0.9% 7.2% 5.6% 3.9% 2.7% 4.5% 0.0% 2.6% 2.7% 4.3% 3.4% 6.4% 5.0% -0.2% 5.7% Annual Change, 2005 through % 8% 6% 4% 2% 0% -2% -4% -6% -8% Severity Frequency * The Recession, High Fuel Prices Helped Temper Frequency and Severity, But this Trend Has Clearly Reversed, Consistent with Experience from Past Recoveries *2016 data are for the 4 quarters ending June 30, Source: ISO/PCI Fast Track data; Insurance Information Institute 21

22 Georgia Coverage: PD Frequency Trends Are Higher in * 5.2% -1.5% 1.6% -2.0% 1.6% -3.4% 1.3% -0.6% 1.6% -0.9% -0.3% 3.6% -2.3% 0.9% 2.9% 5.6% -0.3% 3.6% 2.0% 6.7% 4.2% 9.2% 4.3% Annual Change, 2005 through 2016* 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% Severity Frequency -6.6% * The Recession, High Fuel Prices Helped Temper Frequency and Severity, But this Trend Has Clearly Reversed, Consistent with Experience from Past Recoveries *2016 data are for the 4 quarters ending June 30, Source: ISO/PCI Fast Track data; Insurance Information Institute 22

23 Georgia Coverage: Collision Frequency Trends Are Higher in * 7.6% 1.1% -1.3% -2.4% -2.0% -3.1% 1.0% -1.7% 0.6% -3.3% -0.8% 3.5% -0.2% 1.4% 1.2% 2.5% 1.9% 0.6% 6.2% 8.0% 5.1% 9.0% 4.3% Annual Change, 2005 through 2016* 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -6.1% GA s Collision claim frequency is up sharply over the past 3 years Severity Frequency * The Recession, High Fuel Prices Helped Temper Frequency and Severity, But this Trend Has Clearly Reversed, Consistent with Experience from Past Recoveries *2016 data are for the 4 quarters ending June 30, Source: ISO/PCI Fast Track data; Insurance Information Institute 23

24 Collision Loss Ratio Trending Upward: Pvt. Passenger Auto, GA vs. US, * Loss Ratio 85% 80% 75% 70% 67.7% GA s Collision loss ratio is up 23.7 percentage points since 2010, rising far more rapidly than in the US overall. For the first time in recent history, GA s collision loss ratio is above the US average. 69.3% 69.4% 73.4% 67.9% 74.8% 71.2% 78.2% 76.6% 76.3% 80.4% 65% 60% 55% 61.9% 59.0% 57.0% 50% * US GA Collision Loss Ratios are Rising Much Faster in Georgia than the US Overall *2016 data are for the 4 quarters ending June 30, Source: ISO/PCI Fast Track data; Insurance Information Institute 24

25 Georgia Coverage: Comprehensive Frequency, Severity Typically Tied to Weather Events 20.2% 9.2% -6.4% -10.5% 4.3% -8.4% 18.9% 15.7% -5.1% -3.5% -26.0% -4.1% 6.1% 16.0% -7.7% -6.3% 43.9% 6.4% -17.8% -12.9% 3.5% 1.1% 7.5% 2.7% Annual Change, 2005 through 2016* 50% 40% Severity Frequency 30% 20% 10% 0% -10% -20% -30% * Weather Events Drive Volatility in Comprehensive Coverage *2016 data are for the 4 quarters ending June 30, Source: ISO/PCI Fast Track data; Insurance Information Institute 25

26 Speed Limits Are Up All Over Metro Atlanta Force = Mass x Acceleration* The Laws of Physics Apply Everywhere, including Georgia *Newton s Second Law of Motion 26

27 Higher Speed Limits in Many Parts of Georgia Speed limits are up all around the densely populated metro Atlanta area to as high as 70 mph in some areas Source: WABE at Insurance Information Institute research. 27

28 Higher Speed Limits in Many Parts of Georgia Speed limits are up all around the densely populated metro Atlanta area to as high as 70 mph in some areas Source: WABE at Insurance Information Institute research. 28

29 Rising Highway Fatalities: Georgia s #1 Public Health Crisis? Is Society Too Complacent About Highway Deaths and Injuries? 29

30 Summary of Georgia s Rapid Rise in Auto Accident Frequency, Severity & Fatalities Many Factors Are Contributing to the Mounting Death Toll on Georgia s Highways Recovering Economy More Jobs More Miles Driven Increased Vehicle Density Favorable Demographics Results in More Drivers Lack of Highway Infrastructure Investment Lower Gas Prices More Accidents, More Severe Accidents Impacting Insurance Rates Can t Rely Solely on New Autonomous Technologies 30

31 Insurance Information Institute Online: Thank you for your time and your attention! Twitter: twitter.com/bob_hartwig Download at 31