Speaking about GEICO in 2016, Warren Buffett stated that the reason the insurance company was facing a decline in its performance is the increase in the number of auto accidents. And because there are more accidents, more people file claims for auto insurance. On average, 80% of the money insurers are collected in premiums on auto insurance is being paid out in claims. The fact of the matter is that there are more cars out on the road today.
With the population increasing, there will be an increase in the number of cars. Plus, drivers are dealing with more distractions than ever before, especially when it comes to their mobile devices. The auto insurance industry has had to evolve with the changing circumstances, which has given rise to several interesting trends over the years. Here are 5 remarkable statistics about the auto insurance industry you should know:
1. A Record Year on Year Increase in Number of Miles Driven
In 2014, the total number of miles driven was just over 3 trillion. In 2015, the number rose significantly to reach almost 3.15 trillion. This increase of 3.5% is the largest in the past 25 years. The numbers clearly reflect that more people are spending time driving out on the road. With the frequency of driving increases, the risk of accidents also goes up, and there has been an increase in the number of reported car accidents.
2. Traffic Deaths Are on the Rise
From the turn of the millennium to 2014, the number of traffic deaths was lower than in the previous period. However, 2015 saw a reversal of this trend, where the number of traffic deaths increased by around 8%. In case of death in an auto accident, the value of the claim increases. With more deaths than before, the insurance companies have to pay out greater sums of money.
3. Claims Are Becoming Costlier
Over the past decade or so, the cost of healthcare has increased significantly. People have to spend more money on treatment and as a result, their claims are higher as well. Plus, with the new features introduced in modern vehicles, the cost of repair and replacement can be quite significant. For instance, repairing the backup cameras and other similar accessories on a car can prove quite expensive, even if they don’t directly affect the performance of the vehicle.
4. Car Sales Increasing
In 2015, over 17 million cars were sold across the US. This represented an increase of close to 6% from the previous year. Needless to say, almost all these cars are of a modern make and model, which means they come with state-of-the-art bells and whistles. As mentioned, replacing and repairing them proves more expensive than slightly older models.
5. Not So Smart Smartphone Use Leading to More Accidents
Not surprisingly, 25% of all road accidents are a direct result of a driver using his/her smartphone while driving. Mobile devices are considered the number one distraction for drivers today and this is reflected in the statistics. Research from the AAA shows that 70% of drivers are likely to use their phone while driving, which means the number of accidents caused by smartphones is set to increase.
So these were a few remarkable statistics about the auto insurance industry that show why insurance carriers are struggling to boost earnings and profits. Remember to drive safe and never hesitate to use the services of an insurance agent.