COVID-19 continues to impact the insurance industry in many ways, influencing claims activity as well as the way claims are processed. The path to touchless claims has never been more of a focus than it is now, with claims departments quickly transitioning to virtual workplaces to support customer needs in response to the COVID-19 crisis. As we saw in previous months, the impact of insurance carriers’ shift to virtual claims handling continued in July. For this month’s update, we’ve added a unique view that shows significant increases in Bodily Injury (BI) severity for 90-day BI settlements―as the economy drastically slowed in response to COVID-19. This unique view is in addition to our monthly 180-day BI settlement view.
Also, this month we’re sharing physical damage settlement trends to illustrate how emerging short-term severity payments are changing and what that means in the longer term, as claims make their way through the supplement process. Finally, Uninsured Motorists (UM) claims continued to increase into July, even as travel decreased. This may be due to economic pressures experienced during the ongoing COVID-19 crisis.
Bodily injury severity
Reena Batra and her data science team took a deep dive into a shorter tail window to identify the impact COVID-19 is having on Bodily Injury (BI) severity claims for 90-day early settlements. When looking at a three-month period, claims for May 2020 were more than 10% greater than in May 2019. It will be interesting to see if this rise in severity continues into June. The data also indicated that while claim counts are down overall, a higher percentage of BI claims are closing within three months from the date of loss. We saw this in March, April and May, when compared to prior three-month periods or the same months in 2019. Approximately 2.5% more claims were settled within 90 days.
When looking at our standard 180-day settlement view, you’ll see the trends for pre-COVID BI claims continued a similar trajectory. Over a six-month window, total U.S. Bodily Injury severity dropped slightly in February 2020, to 6.5% from 6.8% in January 2020. Regarding the number of claims paid and closed, we saw a 6.5% increase in February 2020―down 0.1% from January 2020.
Physical damage severity
July metrics showed a continued decline in severity for Collision and Property Damage claims paid and closed within 30 days. However, we see some other interesting severity trends when focusing on short term payments. When carriers make payments within the first ten days from when the claim opened, the payments were much lower than claims paid during that same timeframe in 2019: on average, payments were 8% lower for Property Damage claims and 16% lower for Collision claims in March through August. When payments are made 21-30 days from when the claim opened, they were higher than in 2019: on average, payments were 10% higher for Property Damage claims and 15% higher for Collision claims.
Also, as we followed those claims over time, we noticed that insurers initially paid 8-16% less for payments made early on, but that supplemental payments for Collision were higher when compared to 2019.
July figures represent the lowest severity growth in Collision claims the insurance industry has seen since early 2018. Total U.S. claims grew 4.6% in July 2020 for claims paid and closed within 30 days, down from 4.9% for June 2020. In terms of the number of claims paid and closed, there was a 10.8% decrease from July 2019 to July 2020, down 1.7% from June 2020. This is attributable to fewer claims since March 2020 and is the lowest percentage change we’ve seen in the data. While claim counts are dropping, we’re seeing more Collision claims close within one month―on average 4% more since the pandemic began.
Property damage severity
The industry is seeing a declining month-over-month trend in Property Damage as well, but not to the extent seen for Collision claims. Year over year Property Damage severity across the U.S. increased, with 5.9% growth in July 2020, down 0.1% from 6.0% growth in June 2020. The number of claims paid and closed continued to drop on a monthly basis, down 13.8% from July 2019 to July 2020, following an 11.8% decline in June 2020. While claim counts are dropping, we are seeing approximately 2.5% more claims close within a one-month time period.
We continue to see an average increase of 20% in the rate of Uninsured Motorist claims relative to total claims over the months since the pandemic began.
Stay tuned for August results to see if all these trends continue on their current path.
Note: All percentages are based on a 12-month rolling year over year % change.