PIP Contributes to Rise in Auto Insurance Claims Costs

Auto insurance claims are on the rise across the country according to a new report released by the Insurance Research Council (IRC). The report, issued this week, found that the increase in costs is reversing previous trends of relatively stable costs that have even declined in some cases.

Auto Insurance Claims Severity and Frequency Increasing

The new Insurance Research Council report, titled “Trends in Auto Injury Claims, 2011 Edition,” has revealed some shifts in previous auto insurance claims trends.

In the previous few years, reports from the IRC found that while injury claim severity (the average cost of injury claims) has been on the rise, it has always been offset by declining claim frequency. However, according to the 2011 report, the frequency in which claims are filed has increased, resulting in an overall jump in claims costs.

PIP Claims Have Impacted Total Claims

Among the types of auto insurance claims studied by the IRC, the organization said personal injury protection (PIP) claims–also known as no-fault injury protection–seemed to have had the greatest impact on the claims cost increase. PIP claims costs per insured vehicle increased more than 18 percent from 2008 to 2010 nationwide.

One major reason for the increase in PIP claims is a jump in claims in three of the largest states with no-fault approaches to compensating auto injuries–Florida, Michigan and New York. In Florida alone, the average PIP claim cost-per-insured-vehicle jumped 62 percent between 2008 and 2010, while Michigan has seen a whopping 120 percent jump in the last decade.

Bodily injury (BI) liability claims, the report found, have had a lesser effect on total claims costs over the past year, largely because the effect of rising claim severity has been mitigated somewhat by stabilization.

The report looked at auto injury claim trends by using private passenger auto insurance claims data from national and state-level statistical reporting agencies to come to its conclusions.