Courtesy of http://www.iii.org/fact-statistic/distracted-driving

Results of fatigue from any cause include impaired cognition and performance, motor vehicle crashes, workplace accidents, and health consequences. Research shows that fatigue is a significant factor in motor vehicle, commercial trucking and rail collisions.

• Drowsy driving is a serious problem in the United States. According to a 2014 Centers for Disease Control and Prevention survey among nearly 150,000 adults in 19 states and the District of Columbia, about one in 25 adults reported that they had fallen asleep while driving at least once in the previous 30 days. People who snored or usually slept 6 or fewer hours per day were more likely to report falling asleep while driving.
• The National Highway Safety Traffic Administration (NHTSA) has found that determining a precise number of drowsy-driving crashes, injuries, and fatalities is not yet possible and relies on police and hospital reports to determine the prevalance of drowsy-driving crashes.
• NHTSA reports in 2017 there were 795 fatalities in motor vehicle crashes that involved drowsy drivers. Between 2013 and 2017 there were a total of 4,111 fatalities that involved drowsy driving. In 2017, there were 91,000 police-reported crashes that involved drowsy drivers. Those crashes led to about 50,000 people being injured.
• A December 2016 study by the AAA Foundation for Traffic and Safety found that drivers who usually sleep for less than 5 hours daily, drivers who have slept for less than 7 hours in the past 24 hours, and drivers who have slept for 1 or more hours less than their usual amount of sleep in the past 24 hours have significantly elevated crash rates. The estimated rate ratio for crash involvement associated with driving after only 4-5 hours of sleep compared with 7 hours or more is similar to the U.S. government’s estimates of the risk associated with driving with a blood alcohol concentration equal to or slightly above the legal limit for alcohol in the U.S.
• The Governors Highway Safety Association issued a report in August 2016 concluding that the estimated annual societal cost of fatigue-related fatal and injury crashes was $109 billion. This figure does not include property damage.
• A 2014 AAA Traffic Safety Foundation study found that 37 percent of drivers report having fallen asleep behind the wheel at some point in their lives. An estimated 21 percent of fatal crashes, 13 percent of crashes resulting in severe injury and 6 percent of all crashes, involve a drowsy driver.
• A 2013 study by the Federal Rail Administration found that fatigue greatly increases the chances of an accident in which human factors play a role, with the risk of such an accident rising from 11 percent to 65 percent.
• Although sleepiness can affect all types of crashes during the entire day and night, drowsy-driving crashes most frequently occur between midnight and 6 a.m., or in the late-afternoon, according to NHTSA.
• NHTSA found that many drowsy-driving crashes involve a single vehicle, with no passengers besides the driver, running off the road at a high rate of speed with no evidence of braking. Drowsy driving accidents frequently occur on rural roads and highways.
• The beginning of daylight savings is linked to an increase in auto accidents, according to an analysis by the University of British Columbia and a study by researchers at John Hopkins and Stanford University.
• In 2017, 1,306 drivers who were involved in fatal crashes (or almost 3 percent) were reported as being drowsy, as shown below:

Courtesy of iii.org

Car insurance premiums have risen steadily since 2009 at a faster pace than inflation, according to a recent paper in the Journal of Insurance Regulation.

Transportation is essential to opportunity in the United States. Cost of driving, therefore, isn’t a trivial issue.

When you hear a stat like that, what’s your instinctive response? To blame “greedy insurers” who are making money hand over fist and still aren’t satisfied? It might be, if you don’t follow insurance profitability trends. If you do, you know they’ve been losing money on auto insurance for years, despite increasing rates.

Rising rates have caused some to call for regulation to help make car insurance more affordable. Transportation is essential to opportunity in the United States, and most Americans rely on cars. Cost of driving, therefore, isn’t a trivial issue.

But the authors of the paper – Cost Trends and Affordability of Automobile Insurance in the U.S. – found rate regulation could do more harm than good.

Frequency and severity

The year 2009 was the beginning of the end of the “Great Recession.” In a recovering economy, more people drive – to work, stores, restaurants, et cetera. More vehicles traveling more miles means more accidents and more insurance claims.

The insurance term for this is “frequency.” In addition to more cars on the road, the report finds, distracted driving due to use of digital devices may contribute to increased accident frequency.

In an improving economy, more cars are on the road. More vehicles mean more accidents and insurance claims. Distracted driving due to use of hand-held digital devices also may contribute to increased accident frequency.

Another key term is “severity” – the average cost of claims. Severity has been high for several reasons:

Safety and fuel efficiency are expensive. Cars are safer and cheaper to operate than ever before – thanks to sensors and computers and new materials, all of which are expensive to repair or replace after an accident. This affects loss costs, which are reflected in premiums.

Medical costs are on the rise – especially for hospitalization. The paper cites U.S. Bureau of Labor Statistics data showing that medical and auto insurance inflation growth track closely and hospital cost inflation by far outstrips both. Since many crash victims wind up in the hospital, it’s possible these costs aren’t fully reflected in insurance rates. The paper also cites research indicating that hospitals may charge insurers more than other payers.

Litigation and generous juries. The report doesn’t go into detail about litigation, but the trend known as “social inflation” – marked by growing jury awards and “litigation funding,” in which investors pay plaintiffs to sue large companies in return for a share in the settlement – is well documented.

These factors drive up rates as insurers seek a return that justifies risk taking and operational spending. Nevertheless, the report finds no correlation between rising rates and insurer profitability.

Cracking the affordability nut

Literature on insurance affordability is diverse, with little consensus on the key term. The paper cites research that strongly suggests aggressive rate regulation actually reduces affordability.

“When rate regulation suppresses costs for the riskiest insureds,” the study states, “average premiums, losses, and injuries increase.”

So, what might improve auto insurance affordability?

Some contributors to rising rates – such as repair costs – “should partially self-correct over time,” the paper says. Others, like medical costs and “non-economic” damages (pain and suffering awards) could be addressed through changes in personal injury protection (PIP) laws, antifraud efforts, transparency in medical pricing, or civil justice reform. Stricter “distracted driving” laws and improved enforcement of existing ones could help reduce losses and premiums.

Insurers are investing in technology and improved analytics to streamline their workflows, improve service, and bolster their bottom lines. Some are even discussing getting out of auto entirely – which, should it become a trend, would not bode well for affordability or availability.

Courtesy of iii.org

Car insurance premiums have risen steadily since 2009 at a faster pace than inflation, according to a recent paper in the Journal of Insurance Regulation.

Transportation is essential to opportunity in the United States. Cost of driving, therefore, isn’t a trivial issue.

When you hear a stat like that, what’s your instinctive response? To blame “greedy insurers” who are making money hand over fist and still aren’t satisfied? It might be, if you don’t follow insurance profitability trends. If you do, you know they’ve been losing money on auto insurance for years, despite increasing rates.

Rising rates have caused some to call for regulation to help make car insurance more affordable. Transportation is essential to opportunity in the United States, and most Americans rely on cars. Cost of driving, therefore, isn’t a trivial issue.

But the authors of the paper – Cost Trends and Affordability of Automobile Insurance in the U.S. – found rate regulation could do more harm than good.

Frequency and severity

The year 2009 was the beginning of the end of the “Great Recession.” In a recovering economy, more people drive – to work, stores, restaurants, et cetera. More vehicles traveling more miles means more accidents and more insurance claims.

The insurance term for this is “frequency.” In addition to more cars on the road, the report finds, distracted driving due to use of digital devices may contribute to increased accident frequency.

In an improving economy, more cars are on the road. More vehicles mean more accidents and insurance claims. Distracted driving due to use of hand-held digital devices also may contribute to increased accident frequency.

Another key term is “severity” – the average cost of claims. Severity has been high for several reasons:

Safety and fuel efficiency are expensive. Cars are safer and cheaper to operate than ever before – thanks to sensors and computers and new materials, all of which are expensive to repair or replace after an accident. This affects loss costs, which are reflected in premiums.

Medical costs are on the rise – especially for hospitalization. The paper cites U.S. Bureau of Labor Statistics data showing that medical and auto insurance inflation growth track closely and hospital cost inflation by far outstrips both. Since many crash victims wind up in the hospital, it’s possible these costs aren’t fully reflected in insurance rates. The paper also cites research indicating that hospitals may charge insurers more than other payers.

Litigation and generous juries. The report doesn’t go into detail about litigation, but the trend known as “social inflation” – marked by growing jury awards and “litigation funding,” in which investors pay plaintiffs to sue large companies in return for a share in the settlement – is well documented.

These factors drive up rates as insurers seek a return that justifies risk taking and operational spending. Nevertheless, the report finds no correlation between rising rates and insurer profitability.

Cracking the affordability nut

Literature on insurance affordability is diverse, with little consensus on the key term. The paper cites research that strongly suggests aggressive rate regulation actually reduces affordability.

“When rate regulation suppresses costs for the riskiest insureds,” the study states, “average premiums, losses, and injuries increase.”

So, what might improve auto insurance affordability?

Some contributors to rising rates – such as repair costs – “should partially self-correct over time,” the paper says. Others, like medical costs and “non-economic” damages (pain and suffering awards) could be addressed through changes in personal injury protection (PIP) laws, antifraud efforts, transparency in medical pricing, or civil justice reform. Stricter “distracted driving” laws and improved enforcement of existing ones could help reduce losses and premiums.

Insurers are investing in technology and improved analytics to streamline their workflows, improve service, and bolster their bottom lines. Some are even discussing getting out of auto entirely – which, should it become a trend, would not bode well for affordability or availability.

Courtesy of iii.org

Car insurance premiums have risen steadily since 2009 at a faster pace than inflation, according to a recent paper in the Journal of Insurance Regulation.

Transportation is essential to opportunity in the United States. Cost of driving, therefore, isn’t a trivial issue.

When you hear a stat like that, what’s your instinctive response? To blame “greedy insurers” who are making money hand over fist and still aren’t satisfied? It might be, if you don’t follow insurance profitability trends. If you do, you know they’ve been losing money on auto insurance for years, despite increasing rates.

Rising rates have caused some to call for regulation to help make car insurance more affordable. Transportation is essential to opportunity in the United States, and most Americans rely on cars. Cost of driving, therefore, isn’t a trivial issue.

But the authors of the paper – Cost Trends and Affordability of Automobile Insurance in the U.S. – found rate regulation could do more harm than good.

Frequency and severity

The year 2009 was the beginning of the end of the “Great Recession.” In a recovering economy, more people drive – to work, stores, restaurants, et cetera. More vehicles traveling more miles means more accidents and more insurance claims.

The insurance term for this is “frequency.” In addition to more cars on the road, the report finds, distracted driving due to use of digital devices may contribute to increased accident frequency.

In an improving economy, more cars are on the road. More vehicles mean more accidents and insurance claims. Distracted driving due to use of hand-held digital devices also may contribute to increased accident frequency.

Another key term is “severity” – the average cost of claims. Severity has been high for several reasons:

Safety and fuel efficiency are expensive. Cars are safer and cheaper to operate than ever before – thanks to sensors and computers and new materials, all of which are expensive to repair or replace after an accident. This affects loss costs, which are reflected in premiums.

Medical costs are on the rise – especially for hospitalization. The paper cites U.S. Bureau of Labor Statistics data showing that medical and auto insurance inflation growth track closely and hospital cost inflation by far outstrips both. Since many crash victims wind up in the hospital, it’s possible these costs aren’t fully reflected in insurance rates. The paper also cites research indicating that hospitals may charge insurers more than other payers.

Litigation and generous juries. The report doesn’t go into detail about litigation, but the trend known as “social inflation” – marked by growing jury awards and “litigation funding,” in which investors pay plaintiffs to sue large companies in return for a share in the settlement – is well documented.

These factors drive up rates as insurers seek a return that justifies risk taking and operational spending. Nevertheless, the report finds no correlation between rising rates and insurer profitability.

Cracking the affordability nut

Literature on insurance affordability is diverse, with little consensus on the key term. The paper cites research that strongly suggests aggressive rate regulation actually reduces affordability.

“When rate regulation suppresses costs for the riskiest insureds,” the study states, “average premiums, losses, and injuries increase.”

So, what might improve auto insurance affordability?

Some contributors to rising rates – such as repair costs – “should partially self-correct over time,” the paper says. Others, like medical costs and “non-economic” damages (pain and suffering awards) could be addressed through changes in personal injury protection (PIP) laws, antifraud efforts, transparency in medical pricing, or civil justice reform. Stricter “distracted driving” laws and improved enforcement of existing ones could help reduce losses and premiums.

Insurers are investing in technology and improved analytics to streamline their workflows, improve service, and bolster their bottom lines. Some are even discussing getting out of auto entirely – which, should it become a trend, would not bode well for affordability or availability.

Courtesy of iii.org

There’s a road in my town that’s widely regarded as a speed trap. We all know drivers who say they were unfairly stopped and ticketed on it. I’ve never been and, come to think of it, neither has anyone I talk to about it. Maybe it’s because we live in town and “everyone knows” about the trap.

Cyber is a relatively new, evolving risk. Insurers manage their exposures, in part, by setting coverage limits and excluding events they don’t want to insure.

Sure, people get ticketed. The road is straight and wide, and I guess some feel they should be able to drive faster than the clearly posted speed limit. Or maybe they think the “real” limit is somewhat north of the number posted.

Is that really a “speed trap”?

I think of this road when I hear people say they don’t buy cyber insurance because “everyone knows” cyber claims don’t get paid.

Poster child for “cyber” denial

The example on everyone’s lips when this topic comes up is Mondelez International, the food and beverage giant hit by the NotPetya ransomware attack in 2017. Mondelez incurred losses exceeding $100 million, and its insurer denied coverage based on a war exclusion.

The irony? The policy in question covered property, not cyber. One can argue – as Mondelez does in a lawsuit – that the war exclusion is being unfairly applied, but businesses aren’t ceasing to buy property insurance on account of it!

Cyber claims data are hard to come by, but for nine years NetDiligence has published a Cyber Claims Study analyzing paid claims. The 2019 study looks at more than 2,000 such claims aggregated in over 20 ways, including types and amounts of losses, incident causes, data types exposed, business sectors affected, revenue size of claimants, and financial impact.

Verisk, whose cyber products help insurers write coverage based on their policyholders’ risk characteristics, doesn’t publish claims data but aggregates and incorporates them into its analytics.

NetDiligence publishes an annual Cyber Claims Study. Verisk aggregates and incorporates claims data into its analytics. Why do so many believe cyber claims don’t get paid?

Why the perception/reality gap?

Cyber is a relatively new, evolving risk. Insurers manage their exposures, in part, by setting coverage limits and excluding events they don’t want to insure. Indeed, in a recent survey by J.D. Power and the Insurance Information Institute, small-business owners named “too many exclusions” among the top reasons they don’t buy cyber coverage.

Claims are often denied because of exclusions policyholders might not have known about or understood. Some insurers, for example, include “failure to follow” exclusions for claims arising from inadequate security standards.

Everyone’s responsibility

If insurers want businesses to buy cyber policies and not be hit with unpleasant surprises at claims time, they need to be aggressively transparent about what’s included and excluded. Relegating this to fine print is not a good strategy.

Brokers and agents need to educate themselves about their clients’ needs and be fastidious in aligning coverage recommendations with those needs.

And insurance buyers – those with most at stake – need to understand cyber perils and insurance. For example, insurers require a cyber hygiene self-assessment from applicants. If, after an incident, that assessment proves inaccurate – say, if encryption practices were misrepresented – coverage can be denied.

Insurance isn’t a replacement for cyber diligence. But it can complement it as part of a well-planned risk management program.