Why is the cost of car insurance increasing?

The Insurance Research Council (IRC) recently released a report, Trends in Auto Injury Claims, 2015 Edition, which analyzes claim information from national and state statistical reporting agencies. The data from this report shows a national trend that auto insurance bodily claims have increased dramatically in costs, yet have decreased in frequency. This trend arose even with the improved vehicle safety and graduated licensing laws within the last few years.

The IRC reported that bodily injury liability claims dropped in frequency by 14.5% from 2005 to 2013. The average cost paid per liability claim has increased from $11,738 to $15,506. This jump translates to a 32.1% increase. The same trend also occurred with personal injury protection (no fault) claims. The IRC noted in this category, the average cost per claim rose from $5,802 to $8,017 which translates to a 38.2% cost increase over the same eight years.

These numbers certainly raise questions as to what factors have contributed to and caused this trend. An IRC senior vice president, Elizabeth Sprinkel, stated, “Documenting the specific drivers of cost in the states where cost growth is the greatest will be a priority for the IRC in the years ahead.” As for now, some interesting points can be noted when looking at individual state trends:

-Every state except for Florida, Kansas, Kentucky, and Maryland declined in bodily injury claim frequency from 2005-2013

-Every state with personal injury protection coverage (PIP) except for South Carolina saw a drop in PIP claim frequency

-Every state except for West Virginia had an increase in bodily injury claim severity from 2005-2013

-All states except Pennsylvania increased in PIP claim severity

-Michigan experienced a 72.2% increase in average payment per personal injury protection, with New York and Washington experiencing an over 40% increase from these same years