26 NOVEMBER 2016 Claims Magazine PropertyCasualty360.com
and new car sales took seven years to re-
bound. The average age of light vehicles in
the United States increased to 11. 4 years
at the end of 2012. With fewer new cars
being driven, accidents, on average, were
less costly for insurers.
As better economic conditions boost-
ed sales of new cars from 2012 to 2015,
the trend toward older vehicles slowed.
Therefore, severity is setting new records,
in part because repairing modern safety
technology tends to cost more. Since
2007, the average annual increase in colli-
sion severity is 1.68 percent, but that rate
has been accelerating since 2012.
Between 2007 and 2011, during the
auto sales slump, average annual severity
for collision increased only 0.27 percent.
As more new vehicles were sold between
2011 and 2015, average annual severity
jumped to 3. 10 percent (or 1.75 percent
adjusted for inflation, while severity in
2015 dollars actually declined during the
recession). Similarly, average property
damage severity increased 1.26 percent
between 2007 and 2011, but rose to 3.93
percent between 2011 and 2015, or 2.57
percent adjusted for inflation, while se-
verity in 2015 dollars declined during the
period between 2007 and 2011.
Bodily injury trends
A number of factors can affect the likelihood of bodily injury. For example, bumpers of sport utility vehicles can override
those of passenger cars, increasing the
risk of injuring passengers, while improved safety features of modern vehicles
often mitigate exposures. The frequency
of bodily injury claims has been relatively
stable before and after the recession, but
severity is still increasing. While bodily
injury has long been a significant drag on
profitability, the growing frequency and
severity of physical damage is tightening
the squeeze on industry margins.
Deaths per 100 million miles driven
had been declining steeply since the
mid-1930s, from a figure of 15 to just
slightly more than one. In 2015, this
trend reversed, and the National Safety
Council (NSC) reported that road fatalities jumped 8 percent between 2014 and
2015, the largest increase in 50 years.
While it remains difficult to pinpoint a
precise cause of the troubling spike, po-
FIGURE 2: FREQUENCY & SEVERITY (LIABILITY PROPERTY DAMAGE)
FIGURE 3: FREQUENCY & SEVERITY (PHYSICAL DAMAGE COLLISION)