Insurers are already acutely aware of the linkage between gasprices and the number of vehicle miles travelled. What may be lessapparent, however, are the myriad ways in which persistently highfuel prices affect consumer decisions and behavior that directlyimpact both the severity and frequency of auto insurance claims.

Mitchell International, Inc. explores the relation of volatilefuel pricing to claims in the 2011 third quarter edition ofits Industry Trends Report (ITR), which offers a quarterly snapshotof the auto physical damage collision and casualty industries.Supporting his assertions with statistics from various sources,Greg Horn, ITR editor-in-chief and Mitchell's vice president ofindustry relations, delves into the company's total loss valuationdata warehouse to explain how the year's rapid changes in gaspricing are impacting resale values for cars of various fuelefficiencies in different ways.

“To determine the relationship between fuel price spikes andvalues, we examined the Toyota Corolla, Prius and the FordExpedition as representatives of the fuel-efficient, hybrid and gasguzzler vehicle categories,” said Horn in the quarterly feature,“Timing is Everything: Total Loss Values and Gas Prices.”

“Our claims data fell in line with other reports and marketsources and did show that fuel-efficient vehicles tend to rise morequickly and reliably in value during periods of high prices thangas guzzlers, which fall in value,” he added. “Significantly, ouranalysis showed a market reaction time during fuel price volatilityof approximately three weeks—a delay between the rise in fuelprices and the rise in value of the most fuel efficient vehicle inour study—the hybrid.

“Gas guzzlers, which are traditionally more volatile duringfuel price fluctuations, showed a similar lag pattern,” Horncontinued. “The insurance and collision repair industries need theaccuracy of a true market survey method for valuing a total lossbecause constantly fluctuating fuel prices move too fast, with toogreat an impact, for slower traditional 'book value' valuations toaccurately reflect the true actual cash value of total lossvehicles.”

Among other notable findings in Mitchell's current ITR are:

• Mitchell's 2Q 2011 data reflect an initial average grosscollision appraisal value of $2,761-$90 less than this same periodlast year. However, applying the indicated development factor of 9percent suggests a final Q2-2011 average gross collision appraisalvalue of $3,008. The average Actual Cash Value (ACV) of vehiclesappraised for collision losses during Q2-2011 was $13,705,representing an increase of $500 over the same period lastyear.
• In 2Q 2011, the average gross appraisal value for comprehensivecoverage estimates processed through Mitchell servers was $2,854when compared to $2,625 in 2Q of 2010. Applying the prescribeddevelopment factor of 1 percent for this data set produces anincrease in the adjusted value to $2,883, reflecting the strongstorm season with many hail claims.

The entire report can be accessed on Mitchell's website.