Marketplace Realities 2018: Auto liability

November 6, 2017

    The one thing

    Keep up with the technological changes that are changing the risks associated with driving as well as creating solutions to manage those risks.
  • While vehicle technology certainly has improved vehicle safety, it has also contributed to a material uptick in physical damage claim expense. From increased component part complexity to new expensive materials and higher labor costs, the cost to fix damaged vehicles has increased 20% in the past three years.
  • Technology has also exacerbated the problem of distracted driving. Distracted driving has led to higher frequency of accidents and, unfortunately, an increase in fatalities. Through Q3 2016, auto fatalities were up 8% compared to 2015 — and 2015 was a record auto fatality year in the U.S. All indications point to continued increases during 2017.
  • Technology has also led to solutions to help manage the risk of distracted driving, with software on corporate devices that prevents texting and emailing in a moving vehicle. We expect this to be a more consistent practice as the technology becomes more prevalent.
  • The average cost to settle an auto fatality has increased from nearly $1.9 million in the mid- 2000s to over $3.5 million. Both calendar years 2015 and 2016 witnessed auto fatalities grow in excess of 2,000 compared to prior year norms. Combined with settlement growth, this has created additional industry projected liabilities of $6.4 billion.
  • Price prediction

    +3% to +8%
  • With a full underwriting cycle behind us, the marketplace has slowed its effort to modify auto liability program structures (e.g., higher retentions, higher umbrella attachments, etc.), a practice we saw frequently in 2016. However, the marketplace has not stopped pushing rate. For accounts with a heavy auto exposure, rates could rise more than 10%, and even insureds with a modest fleet should expect rate pressure at renewal.