Crashes involving lighter vehicles generate more expensive auto injury claims, a nonprofit insurance industry-backed research group reported, and said the finding could offset accident frequency declines linked to rising gasoline prices.
The new research may provide an understanding of how higher gas prices will affect auto insurance costs, Malvern, Pa.-based Insurance Research Council explained.
IRC found the average auto injury claim payment in accidents involving lighter-weight vehicles was 14.3 percent greater than the average payment in accidents involving heavy vehicles, or $5,554 compared with $4,859.
According to the researchers, their findings suggest that as more drivers are led by rising gas prices to purchase lighter and more fuel-efficient vehicles, “the average cost of injury claims arising from motor vehicle accidents can be expected to climb.”
The IRC is the latest group in the insurance sector to enter a debate that was highlighted when New York Insurance Commissioner Eric Dinallo got an insurer to drop a rate increase request citing federal data showing motorists are driving less.
His action prompted the Property Casualty Insurers Association of America (PCI) to announce that it was wrong to assume reduced mileage would equal less claim costs, because there is a rising expense for repairs to crashed vehicles.
IRC Senior Vice President Elizabeth A. Sprinkel said in a statement, “The impact of higher gas prices on drivers, accident severity and insurance costs is anything but simple.”
The IRC findings, she said, “indicate that higher average claim costs associated with lighter vehicles have the potential to offset, to some extent, whatever beneficial effects might occur from less driving. It’s far too early to know how all these effects together will influence insurance claim costs.”
To investigate the potential impact of rising gas prices on insurance claim costs, IRC said it analyzed 9,140 personal injury protection (PIP) claims closed with payment in 2007.
IRC data for these claims were collected as part of the organization’s most recent auto injury closed claim study, summarized in the report, “Auto Injury Insurance Claims: Countrywide Patterns in Treatment, Cost, and Compensation, 2008 Edition.”
Researchers at IRC said they compared average total claim payments for the lightest 25 percent of the vehicles involved in accidents resulting in PIP claims with average total claim payments for the heaviest 25 percent of vehicles. Only claims involving automobiles, minivans and sport utility vehicles were examined. Claims involving fatalities or permanent total disabilities were excluded to eliminate the distorting effects of these few claims on average cost calculations.
Of all vehicles involved in PIP claims closed in 2007, 25 percent weighed 2,771 pounds or less, and another 25 percent weighed 3,726 pounds or more. On average payment for claims in the lighter-weight group was $695 more than the average payment for claims in the higher-weight group.
IRC said there was additional evidence confirming the greater seriousness of injuries involving lighter-weight vehicles.
Among claimants in heavier vehicles, 46 percent lost no time from work following their accidents. In contrast, only 38 percent of claimants in the lighter-weight vehicles lost no time from work. Claimants injured in lighter-weight vehicles were also 12 percent more likely to be hospitalized following their injury than were claimants in heavier vehicles.
IRC said gasoline prices are expected to have numerous consequences for consumers and businesses, but whether less driving will result in fewer accidents, and, in turn, lower automobile insurance costs, “is unclear.”
According to IRC it is clear that a reduction in the amount of driving is not the only consequence of higher gas prices that could affect automobile insurance costs. These IRC research findings suggest higher average claim costs as another potential consequence of rising gas prices.
IRC said more detailed information on its research is available from David Corum at (610) 644-2212, ext. 7506, or by e-mail at firstname.lastname@example.org, or online at www.ircweb.org
IRC is a division of the American Institute for Chartered Property-Casualty Underwriters. The AICPCU is an independent, nonprofit organization dedicated to providing educational programs, professional certification and research for the property and casualty insurance business.
Though supported by insurers, the IRC states it “does not lobby or advocate legislative positions.”