Data may imply coronavirus auto-premium reductions were premature
Amid record low travel and vehicle miles traveled, severe and fatal crashes in cities around the United States have increased. From New York City to Austin Texas, there has been even more speeding, more deadly crashes, and more frequent severe crashes than before Covid.
Yes, you read that correctly.
In New York City, traffic volume decreased between 78% and 92% compared to January, but there was a 57% increase in speeding violations in the ten days following the Governor’s stay at home orders. And there were 6 deadly crashes from March 2 to April 8, which is more deadly crashes than the same time period in any of the previous five years.
In Austin, Texas, “While average traffic volumes appear to be down ~50% from earlier this year, overall crashes are only down ~20% and we’ve seen an increase in serious injuries by ~15%,” Susanne Harm of the city’s transportation department wrote via email and reported by CityMetric. “One takeaway from this is that people who continue to drive seem to be getting into serious car crashes more frequently.”
These data should be very worrisome for those carriers, including Geico, Liberty Mutual, American Family, and USAA, that just returned billions in premiums to auto insurance customers based on projected reductions in crash frequency, without considering severity.
Even though the roads are clear that doesn’t mean they’re safe. And even though most people are staying home, a rare but deadly crash can be extremely costly. It is the severe and fatal crashes that are likely to be litigated and with increasingly sympathetic juries, just one bad crash can meaningfully affect returns.
This also suggests a much broader issue with risk measurement is at play in insurance — vehicle miles traveled may not be a great approximator for the most severe and costly automobile crashes. Usage-based-insurers that have touted their superior loss calculation methodologies are likely using the wrong metric too.
Instead of returning losses before seeing claims experiences play out, it may be more advantageous to explore alternative risk measurements and invest the premium surpluses into driver safety and risk technologies. For example, telematics that keep track of speeding behaviors, or data streams and external facing cameras that monitor the risk of the road itself.
Data-driven leadership is necessary to meet the moment. Investing in risk technologies and data will not only result in more accurate risk pricing and long-term profitability, but also make sure that the drivers who need to be on the road today get home safely.