The high claims severity that plagued the personal auto insurance market in 2023 shows no signs of abating, according to the “2024 LexisNexis® U.S. Auto Insurance Trends Report," released today, which offered various other insights into the auto insurance market.

Bodily injury severity has risen 20% from the end of 2020 to the end of 2023, according to the report, while severity for all material damage coverages has increased 47%. Contributing factors include parts and labor shortages, storage costs, attorney involvement and increases in medical treatment costs.

In a separate study in 2023, LexisNexis commissioned a market research study to learn about third-party claimants who hired an attorney in auto claims—a major contributor to claims cost increases.

Following an auto accident, 85% of claimants were approached by one attorney while about 60% heard from two or more. Among the claimants who hired an attorney, 51% received a higher settlement amount, the study found, and of the claimants who used legal counsel, nearly two-thirds would definitely do so again, with another quarter saying they probably would.

Further, total loss claims have increased 29% since 2020, with more than 1 in 4 collision claims in 2023 deemed total losses. In cases of total loss, 46% of consumers were dissatisfied with their claims experience, with 40% of all respondents said it took a month or longer to obtain the full payment for their claim.

As total miles driven returned to 2019 levels in 2023, the risky driving patterns that emerged during the COVID-19 pandemic continued to rise, with all moving and non-moving driving violations increasing 4% year-over-year in 2023. Major speeding violations were up 10% from 2022 to 2023—and up 36% from 2019. Additionally, driving under the influence (DUI) violations grew 8% from 2022 to 2023.

Distracted driving violations increased by 10% from 2022 to 2023. Young drivers are most susceptible to distraction, with distracted driving violations by Generation Z increasing 24% from 2022, and 66% from 2019. The same violation increased 9% from 2022 among millennials.

Although risky driving behavior persists, many insurers haven't updated their pricing models to reflect those changes, the report warned.

As carriers seek to alleviate the inflation and high claims costs that contributed to a property & casualty combined ratio of 105% in 2023, significant rate increases of 14% reduced pressure on profits but also led to a drop of three percentage points in retention from 83% to 80%, LexisNexis found.

Among respondents with auto insurance at the end of 2023, 41% had shopped at least once for a new policy in 2023. Many ended up switching, causing the number of new policies to rise 6.2% in 2023. Meanwhile, insurance industry advertising spending decreased roughly 45% from its height in 2021.

With low-risk customers prompted to jump to better options in the market, insurers may be retaining policies with higher risk at the wrong price, the report points out. “Insurers who are not actively engaged in managing the change in risk in their renewals may find it difficult to maintain profitability. The lack of a consistent renewal strategy could also threaten new business rate competitiveness. Insurers can update renewal underwriting strategies by leveraging predictive internal and external data and models to help maintain price to risk."

Meanwhile, electric vehicles (EVs) are another emerging factor in personal auto. As the EV market continues to emerge, with a 54% increase in EV sales in 2023 over 2022, insurance risks also continue to grow. Claim frequency and severity for EVs were respectively 17% and 34% higher than for private passenger autos overall. And while EVs still only comprise 1.5% of all private passenger autos, they accounted for 2.3% of the total claims payment among all personal autos in 2023. 

AnneMarie McPherson Spears is IA news editor.