How the Pandemic Has Affected Driving Behavior & Auto Insurance

The COVID-19 pandemic has had a significant impact on driver behavior. This, in turn, has impacted traffic crash and fatality rates, but what’s less clear is what happens next.

The Drop in Driving

A recent post from LexisNexis shows how mileage plummeted in early April as shutdowns gripped the country, staying at about 60% of 2019 mileage for about a month before starting to climb back up.

The in-depth analysis also shows that weekend travel rates were lower than weekday travel rates early on in states with stay-at-home orders, and that traffic was especially slow during weekday evenings and weekend nights. This may suggest that people were mostly going out for essential work and business, not socialization.

As a result of the overall decrease in miles driven, many consumers thought that they shouldn’t have to pay as much for car insurance, and many auto insurers responded with discounts. According to Business Insider, auto insurance carriers offered $10 billion in insurance rebates during the pandemic, which is unprecedented.

The Impact on Traffic Fatalities

It seems reasonable to assume that a drop in traffic should also result in a drop in traffic fatalities. This is indeed what happened during the pandemic – but with one big catch.

Some drivers saw the emptied roads as an invitation to drive outside of their normal behavior, and even in certain situations, drive dangerously. Throughout the pandemic, there were widespread reports of speeding and other reckless driving behaviors.

The result? While the overall number of traffic fatalities dropped, an increase in risky driving behaviors caused the rate of traffic fatalities per mile driven to increase.

According to a press release from the NHTSA, 8,870 people died in motor vehicle crashes during the second quarter of 2020, when stay-at-home orders were at their height. This is a decrease of 3.3% compared to the second quarter of 2019. However, traffic volume decreased by 16%, meaning the drop in traffic fatalities should have been much greater than 3.3%. The traffic fatality rate per 100 million VMT is expected to be 1.25 for the first half of 2020, an increase from 1.06 in the first half of 2019.

Insurance Implications

Despite less driving and higher fatalities per mile driven, the P&C insurance industry appears to be holding strong. In an October 15, 2020 report, the Insurance Information Institute said, “P&C industry operating ratio fell from 90.6 in 2019:1H to 92.3 in 2020:1H, and natural catastrophe losses rose from $13.8 billion to $24.7 billion in 2020:1H from the same period a year earlier. Economic forces affecting the P&C insurance are also addressed, such as commercial property vacancies and hospital care. New vehicle sales are in recession mode, as are private passenger auto premiums.”  The financial impact to the P&C market is essentially due to the change in consumer behavior that is not fully understood. Still, as our clients model the effects, they are looking to our team to help them remain profitable through the new normal.

Agility is Essential

Unprecedented times call for agile insurance pricing, underwriting and claims management.  While better decisions will drive better results for carriers, the human element of the business has been impacted by the pandemic.  Looking at how COVID has impacted the individual, we can deduce that the emotional and mental stresses are changing the consumer in ways that are different than what we have faced before.  Having the tools to make quick adjustments based on your business is essential in uncertain times.

For carriers and MGA’s that are looking to easily pivot based on the market, they need to use a low-code, configurable platform to improve their underwriting and claims processes.  To learn more about how insurers are getting to market with speed and managing the policy lifecycle, read this case study.