Auto Insurance Claims: Yearly Average

There are a number of factors that determine how many auto insurance claims are made each year. The number of registered vehicles in the US, for example, has been steadily increasing over the years, with around 274 million registered vehicles in late 2019. This has resulted in an increased number of vehicle crashes, with the Insurance Research Council reporting that 79% of all claimed economic losses in auto claims in 2017 were for medical expenses.

In 2022, the average cost of car insurance in the US was $1,771 per year, or about $148 per month. The cost of insurance varies depending on age, gender, and state, with Michigan having the highest average insurance rate of over $3,000. The cost of insurance can also be affected by factors such as credit score, speeding tickets, and DUI convictions.

The four main categories of auto insurance claims are bodily injury, property damage, collision, and comprehensive. Bodily injury and property damage claims are the most expensive, costing on average $16,260 and $3,729 per loss, respectively. Collision and comprehensive claims, which cover damage to the policyholder's vehicle, have lower average costs, at $3,278 and $1,690, respectively.

According to the Institute of Insurance Information, motorists file insurance claims roughly once every 17.9 years. The frequency of claims varies depending on the type of claim, with collision claims being the most common, followed by property damage, comprehensive, and bodily injury claims.

Average annual cost of auto insurance in the US

The average cost of car insurance in the US varies depending on the type of coverage, the driver's age, gender, location, and driving record. Here is an overview of the average annual and monthly costs for car insurance in the US:

Average Annual Cost of Car Insurance in the US:

• Full Coverage: The national average cost of full-coverage car insurance is around $1,718 to $2,681 per year. This type of policy includes liability, comprehensive, and collision insurance, providing protection for various situations.
• Minimum Coverage: The average annual cost of minimum or liability-only coverage is approximately $467 to $869. This is the most basic type of car insurance required by law in most states and covers the minimum amount of liability.

Average Monthly Cost of Car Insurance in the US:

• Full Coverage: The average monthly cost of full-coverage car insurance is about $143 to $223.
• Minimum Coverage: The average monthly cost of minimum or liability-only coverage is around $41 to $72.

It's important to note that these averages may not reflect the exact cost of car insurance for an individual, as rates can vary significantly based on personal factors and the insurance company. Other factors that can influence the cost of car insurance include age, gender, driving record, credit score, vehicle type, and location. It's recommended to compare quotes from multiple insurance providers to find the most suitable coverage and price for your specific needs.

Average auto insurance premium

The average cost of car insurance varies depending on several factors, including age, location, driving record, and credit history. In the United States, the average cost of car insurance is $1,771 per year, or about $148 per month. However, this number can range from $876 per year in Maine to $2,996 per year in New York.

Age is a significant factor in determining car insurance premiums. Younger drivers, especially those under 25, tend to pay higher premiums due to their lack of driving experience and higher accident rates. For example, the average cost of car insurance for a 20-year-old driver is around $3,576 for full coverage and $1,023 for minimum coverage. As drivers age, their premiums tend to decrease, with drivers in their 40s and 50s often paying the lowest rates. However, premiums may slightly increase for drivers over 65 due to increased risks associated with aging, such as deteriorating vision and delayed reaction time.

Location also plays a crucial role in determining car insurance costs. Urban areas, particularly those with higher population densities, vehicle crime rates, and traffic, tend to have higher insurance premiums. On the other hand, rural and less densely populated regions often have lower insurance costs. Additionally, each state has its own regulations, which further influence insurance rates. For example, Michigan and New York are among the most expensive states for car insurance, while states like New Hampshire, Vermont, and Ohio offer more affordable rates.

The type of coverage also impacts the cost of car insurance. Full coverage insurance, which includes comprehensive and collision coverage, is typically more expensive than minimum or liability-only coverage. The national average for full coverage insurance is $1,296 per year, or $108 per month. In contrast, liability-only coverage costs an average of $595 per year, or $50 per month. It's important to note that full coverage is generally recommended as it provides more comprehensive protection in the event of an accident.

Other factors that can affect car insurance premiums include gender, with young men typically paying higher rates than young women, and credit score, with drivers with poor credit paying significantly more for insurance. Additionally, having a clean driving record and choosing a vehicle with lower insurance costs can help lower premiums.

Auto insurance rates by state

Auto insurance rates vary significantly from state to state. The national average cost of car insurance is $2,118 per year, according to Forbes Advisor's analysis of full-coverage car insurance rates. However, the average cost of car insurance in each state can range from as low as $1,021 in Idaho to as high as $4,769 in New York.

Several factors contribute to the variation in auto insurance rates across states. One key factor is the state's requirements for minimum car insurance coverage. Some states mandate additional coverages, such as uninsured motorist coverage, medical payments, or personal injury protection (PIP), which can drive up the cost of insurance. For example, Florida, Michigan, New Jersey, New York, and Delaware, which are among the most expensive states for car insurance, all require PIP coverage.

The frequency and cost of car insurance claims in a state also impact rates. States with a higher number of claims due to severe weather, urban congestion, or high crime rates tend to have higher insurance costs. For instance, Florida's extreme weather and Louisiana's litigious nature contribute to their high insurance rates.

Additionally, the cost of car repairs and medical care varies across states, affecting insurance rates. States with higher repair and medical costs will generally have higher insurance rates, as insurers need to pay out more for claims.

The competitiveness of the auto insurance market in a state can also influence rates. States with a larger number of national and regional insurance companies tend to have more competitive rates, giving consumers more options to shop around and find the best price.

Other factors that can affect auto insurance rates include the state's population density, the presence of no-fault insurance laws, and the driver's age, gender, driving record, and credit score.

Cheapest States for Car Insurance:

• Idaho: $1,021
• Vermont: $1,199
• Maine: $1,238
• New Hampshire: $1,362
• Ohio: $1,402

Most Expensive States for Car Insurance:

• New York: $4,769
• Florida: $3,244
• Louisiana: $3,040
• Michigan: $3,643
• Delaware: $2,881

Auto insurance claims by type

Auto insurance claims can be categorised into several types, depending on the nature of the incident and the coverage provided by the policy. Here is a detailed breakdown of the different types of auto insurance claims:

Liability Coverage Claims

Liability coverage is a standard component of auto insurance policies and is required in most US states. This type of coverage protects the policyholder if they cause damage to others or their property. It includes bodily injury liability, which covers medical bills and other injury-related costs for individuals injured in an accident caused by the policyholder. Property damage liability, on the other hand, covers the cost of repairing or replacing damaged property, excluding the policyholder's car. Liability coverage claims typically arise when the policyholder is at fault in an accident and is legally responsible for the resulting injuries or property damage.

Collision Coverage Claims

Collision coverage pertains to damage caused to the policyholder's vehicle in a collision with another car, object, or as a result of flipping over. This type of coverage is designed to help with the repair costs, regardless of who is at fault in the accident. Collision coverage does not include incidents involving animals or vehicle breakdowns. Claims under collision coverage are typically made when the policyholder's car sustains damage in a collision and requires repairs or replacement.

Comprehensive Coverage Claims

Comprehensive coverage insures the policyholder's vehicle against a range of incidents beyond collisions. This includes theft, vandalism, fire, severe weather damage, and accidents involving animals. Comprehensive coverage is typically sold alongside collision coverage, providing a more comprehensive level of protection. Claims under comprehensive coverage can arise from various scenarios, such as vandalism, hail damage, or a cracked windshield.

Medical Payments Coverage Claims

Medical payments coverage focuses on the medical expenses incurred by the policyholder and their passengers following a car accident, regardless of who is at fault. This type of coverage ensures that the cost of treating injuries, rehabilitation, and sometimes lost wages and funeral expenses are covered. Claims under medical payments coverage are typically made when individuals involved in an accident require medical attention and incur related expenses.

Personal Injury Protection (PIP) Claims

Personal injury protection, or PIP, is a type of coverage that provides similar benefits to medical payments coverage but may also include additional protections. PIP covers medical expenses and lost wages resulting from injuries sustained in a car accident. In some cases, PIP can also cover the cost of replacing services normally performed by the injured individual, such as childcare or household chores. PIP claims are typically filed when the policyholder or their passengers require medical treatment and face lost income due to their injuries.

Uninsured and Underinsured Motorist Coverage Claims

Uninsured motorist coverage protects the policyholder when involved in an accident with an uninsured or hit-and-run driver. It provides reimbursement for damage to the policyholder's vehicle, medical costs, and lost wages resulting from the accident. Underinsured motorist coverage, on the other hand, comes into play when the at-fault driver has insufficient insurance to cover the total cost of the accident. These types of claims are made when the policyholder is involved in an accident with a driver who lacks adequate insurance coverage, ensuring that the policyholder receives the necessary compensation.

Auto insurance fraud statistics

Insurance fraud is a deliberate deception perpetrated for financial gain. It can be committed by applicants, policyholders, third-party claimants, or professionals who provide services to claimants. Insurance agents and company employees may also commit insurance fraud. Common frauds include padding (inflating claims), misrepresenting facts on an insurance application, submitting claims for injuries or damage that never occurred, and staging accidents.

According to a 2017 study by Verisk, auto insurers lose at least $29 billion a year to premium leakage, which is omitted or misstated underwriting information that leads to inaccurate rates. Unrecognized drivers ($10.3 billion), underestimated mileage ($5.4 billion), violations/accidents ($3.4 billion), and false garaging to lower premiums ($2.9 billion) are among the types of information failures and fraudulent practices that drive up costs.

Types of Auto Insurance Fraud

• Staged-crash rings: Staged-crash rings defraud auto insurers out of billions of dollars annually by billing for unnecessary treatment of phantom injuries. These are typically bogus soft-tissue injuries, such as sore backs or whiplash, which are challenging to medically identify and dispute.
• Premium diversion: Premium diversion is the embezzlement of insurance premiums, often involving an insurance agent failing to send premiums to the underwriter and instead keeping the money for personal use. Another scheme involves selling insurance without a license, collecting premiums, and not paying claims.
• Fee churning: In fee churning, a series of intermediaries take commissions through reinsurance agreements, gradually reducing the initial premium until there is no money left to pay claims. The company left holding the bag is often a business set up to fail by the conspirators.
• Asset diversion: Asset diversion is the theft of insurance company assets and occurs almost exclusively in the context of an acquisition or merger. It often involves acquiring control of an insurance company with borrowed funds, then using the acquired company's assets to pay off the debt, with the remaining assets diverted to the subject.
• Healthcare fraud: Healthcare fraud affects all types of property/casualty insurance coverage that includes a medical care component, such as medical payments for auto accident victims. Doctors, hospitals, nursing homes, diagnostic facilities, medical equipment suppliers, and attorneys have been implicated in scams to defraud the system. The National Health Care Anti-Fraud Association (NHCAA) estimates that healthcare fraud results in losses of $68 billion, or as much as $300 billion.
• Workers' compensation fraud: Employers misrepresent their payroll or the type of work carried out by their workers to pay lower premiums. Some employers also apply for coverage under different names to avoid detection of their poor claim record or to foil attempts to recover monies owed on previous policies.
• Salvage fraud: Some states require "salvage only" on the titles of flooded vehicles, but unscrupulous sellers may switch or clone the manufacturers' serial number plates and put them on a flooded but repaired vehicle. This practice is called "title washing."
• Counterfeit parts: Unscrupulous auto body repair shops may use counterfeit airbags, which are produced for nearly every vehicle model, and obtain reimbursement from insurance companies for legitimate airbags.

Statistics on Auto Insurance Fraud

• A 2022 study by the Coalition Against Insurance Fraud (CAIF) estimates that insurance fraud costs US consumers $308.6 billion annually, including Life Insurance ($74.7 billion), Property and Casualty ($45 billion), Workers' Compensation ($34 billion), and Auto Theft ($7.4 billion).
• The total cost of non-health insurance fraud is estimated to be more than $40 billion per year, costing the average US family between $400 and $700 per year in increased premiums.
• Fraud comprises about 10% of property-casualty insurance losses and loss adjustment expenses annually, or about $34 billion, according to the Insurance Information Institute (September 2017).
• 84% of insurance organizations say that fraud cases they investigate involve more than one industry, and 76% of cross-industry fraud cases have a moderate to high impact on insurance organizations.
• Identity theft (49%), hacking (45%), employee-agent (37%), and claims (34%) are the fraud schemes of highest concern, according to LexisNexis (June 2016).
• In 2009, auto insurers lost $15.9 billion due to premium rating errors in private passenger auto insurance, accounting for nearly 10% of the $161.7 billion in personal auto premiums written.
• More than 60% of insurers say that fraud has increased over the last three years, and nearly 75% use automated systems to detect false claims.
• Insurer use of rate-evasion technology has jumped 40% since 2012, and the use of predictive modeling and link analysis has increased 21% in two years.

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