From the September 2011 issue of Claims Magazine •Subscribe!

Mitchell 3Q Report: Volatile Gas Pricing Impacts Total Losses, Resale Values

Insurers are already acutely aware of the linkage between gas prices and the number of vehicle miles traveled. What may be less apparent, however, are the myriad ways in which persistently high fuel prices affect consumer decisions and behavior that directly impact both the severity and frequency of auto insurance claims.

Mitchell International, Inc. explores the relation of volatile fuel pricing to claims in the third quarter 2011 edition of its Industry Trends Report (ITR), which offers a quarterly snapshot of 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 of industry relations, delves into the company’s total loss valuation data warehouse to explain how the year’s rapid changes in gas pricing are impacting resale values for cars of various fuel efficiencies in different ways.

“To determine the relationship between fuel price spikes and values, we examined the Toyota Corolla, Prius and the Ford Expedition as representatives of the fuel-efficient, hybrid and gas guzzler 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 market sources and did show that fuel-efficient vehicles tend to rise more quickly and reliably in value during periods of high prices than gas guzzlers, which fall in value,” he added. “Significantly, our analysis showed a market reaction time during fuel price volatility of approximately three weeks—a delay between the rise in fuel prices and the rise in value of the most fuel efficient vehicle in our study—the hybrid.

Gas guzzlers, which are traditionally more volatile during fuel price fluctuations, showed a similar lag pattern,” Horn continued. “The insurance and collision repair industries need the accuracy of a true market survey method for valuing a total loss because constantly fluctuating fuel prices move too fast, with too great an impact, for slower traditional ‘book value’ valuations to accurately reflect the true actual cash value of total loss vehicles.”

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

"Mitchell’s 2Q-2011 data reflect an initial average gross collision appraisal value of $2,761, about $90 less than this same period last year. However, applying the indicated development factor of 9 percent suggests a final 2Q-2011 average gross collision appraisal value of $3,008. The average actual cash value (ACV) of vehicles appraised for collision losses during 22-2011 was $13,705, representing an increase of $500 over the same period last year.

"In 2Q-2011, the average gross appraisal value for comprehensive coverage estimates processed through Mitchell servers was $2,854 when compared to $2,625 in 2Q-2010. Applying the prescribed development factor of 1 percent for this data set produces an increase in the adjusted value to $2,883, reflecting the strong storm season with many hail claims."

Horn added that anticipated dip in gas prices would result in more miles driven and thus a possible uptick in the number of auto claims.


Resource Center

View All »

Complimentary Case Study: Helping achieve your financial goals By:...

Find out how a Special Investigation Union used TLOxp to save the company money and...

Do Your Clients Hold The Right CDL License?

Learn about the various classes of CDL Licenses and the industries that are impacted by...

Integrated Content & Communications: A Key Business Issue For Insurers

Insurers are renewing their focus on top line growth, and many are learning that growth...

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Claims Connection eNewsletter

Breaking news on disasters, fraud, legal trends, technology, and CE initiatives for the P&C claim professional – FREE. Sign Up Now!

Claims-Handling Guidelines

Claims Magazine is providing the following free guidelines and regulations in order to help adjusting professionals stay abreast of each state’s unique property and casualty claim-handling requirements.

View our State Guidelines »

Advertisement. Closing in 15 seconds.