As June began to show a rebound in claims activity after suffering its lowest point in April, the impacts of virtual claims handling have created a new pattern of normalcy. This month’s blog identifies how severity payment trends are changing and what it means in the longer term as claims make their way through the supplement process. The increase of Uninsured Motorists claims continued into June as travel increased and may be a result of economic pressures experienced during the COVID-19 crisis.
Note: Except for post-quarantine claims count analysis, our data scientists examined loss trend data for June 2020 for Collision and Property Damage coverages and updated the Bodily Injury numbers through January 2020 through a 180-day view. We base this information on claims paid and closed at a coverage level, and within a specific window of time. The statistics provided below are all calculated with 12-month rolling averages on this internal research.
COVID Severity Analysis
June saw a continued decline in severity for Collision and Property Damage claims paid and closed in 30 days. We see some other interesting trends in severity. When carriers make payments in the first ten days from when the claim opens, the payments were much lower than claims paid during that timeframe in 2019. On average, payments were 8% less for Property Damage claims and 16% less for Collision claims in March through July. We also noticed that when payments are made 21-30 days from when the claim opens; they were higher than in 2019. On average, payments were 10% more on Property Damage claims and 14% more for Collision claims. So overall, the payments made in the month were about the same as in previous years and months.
As we follow those claims over time, we noticed that even though initially insurers paid 10 to 20% less on those claims with payments early on, the supplemental payments for Collision were higher when compared to 2019.
Ultimately what we are seeing is that Collision payments are about 5% greater than what we would have expected to see in 2020, based on typical trends for longer-term claims. For Property Damage, 2020 payments are nearly flat in comparison to 2019.
The path to touchless claims has never been more of a focus as it is now with claims departments quickly transforming to virtual workplaces to support customer needs. Stay tuned for July’s results to see if the trends maintain their current path and begin creating predictable patterns based on the current claims environment.
Total U.S. Industry saw 4.9% growth in June 2020 for Collision severity for claims paid and closed in 30 days. This is down from 5.7% in May 2020 and is the lowest growth we have seen since early 2018. For the number of claims paid and closed, there was a 9.1% decrease from June 2019 to June 2020, down 1.5% from the 7.6% decrease in May 2020. This is due to fewer claims in March 2020 and the lowest percent change we have seen in the data. While overall claims counts are dropping, we see more Collision claims close during a month, between 3 to 6% more in post-quarantine months.
Property Damage Severity
Total U.S. Industry continued to see an increase in Property Damage severity with 6.0% growth in June 2020, down just slightly from 6.3% growth in May 2020. We are seeing a declining trend here, but not as drastic as the change seen in Collision claims. The number of claims paid and closed continued to drop, down 11.8% from June 2019 to June 2020. Claims paid and closed saw a 10.4% decrease in May, a 7.2% decrease in April, and a 2.4% decrease in March. This is due to fewer claims reported since March 2020. While claims counts are dropping, we see approximately 2% more claims close on a monthly basis.
Bodily Injury Severity
Total U.S. Industry Bodily Injury severity remained steady at 6.8% in January 2020. In terms of the number of claims paid and closed, we saw a 6.6% increase in January 2020, down 0.1% from December 2019.
Uninsured Motorist Claims
The economic effects of COVID-19 continue to impact the Insurance Industry in many ways, as we continue to see an average increase of 22% in the rate of Uninsured Motorist claims relative to total claims over the months since COVID-19 began.
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Note: We base all percentages on a 12-month rolling year-over-year percentage change, except for the claim counts analysis after March 2020.
*Expanded views are available for LexisNexis® Claims Discovery users.