As we continue to provide insights on pandemic-related claims activities, it is incredible to see how economic and workplace changes influence overall claims results. This blog series provides updates for collision, property damage, and bodily injury (BI) loss trends, including an update on the early bodily injury (90 days) settlements that continue to show double-digit severity increase while still showing overall improvement as more injury claims are closing faster.
This month we have added additional trend insights into the express collision and property damage (virtual claims) payments within ten days of the loss date. These quick claim payments may be a result of virtual or photo-based damage assessments. As shared earlier this year, we saw some dramatic drops in the amount of first payments once the industry pivoted to primarily virtual auto damage assessments due to COVID-19. In fact, in June 2020 we observed the first payments in this category down 21% while supplement payment amounts were up 12%. As you can see in the graph below, in October 2020 we observed first payments for collision claims closer to the prior year, but still down 14% while supplements spiked to 20%. Property damage trends are similar but show smaller variances for initial and supplemental payment amounts. The change in initial payments suggests that adjusters are becoming more comfortable in assessing repair costs from photos. There is still work needed in this area, but adjusters seem to have gained more experience in the virtual claims handling process.
Bodily Injury Severity
BI severity for 90-day early settlements remained steady in June and July, the highest levels the industry has had since early 2017. When looking at three months from the date of loss to the close of the claim, claim severity for July 2020 was 11.5% greater than July 2019. The number of claims paid and closed dropped to their lowest point in April 2020. However, that number steadily increased during May, June, and July.
When looking at our 180-day settlement view, the declining trend in severity growth reversed and increased one percentage point. Over a six-month window, Bodily Injury severity increased in April 2020 to 7.2% from 6.2% in March 2020. Regarding the number of claims paid and closed, we saw a negative 1.9% growth in April 2020, down from 3.7% in March 2020.
Collision claims in August 2020 saw the lowest severity growth the insurance industry has seen over the last few years. In September there was a 0.1% increase, to 4.3%. Claims count paid and closed within 30 days was 14.2% lower than the same month of the previous year. This is attributable to fewer claims submitted since March 2020 and is the lowest percentage change we’ve seen in the data. While claim counts are dropping, we see more collision claims close within one month―on average more than 3% more since the pandemic began.
Property Damage Severity
September marked a continued decline in severity for property damage (PD) claims, as well as claims paid and closed within 30 days. PD severity dropped to 5.3% in September from 5.4% in August. The claim count paid and closed was 18.4% lower than the same month in the prior year. This decline was sharper than the 16.1% decline in August 2020.
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.
My colleague, Bill Brower, Vice President of Auto Claims for LexisNexis Risk Solutions, recently sat down for an interview with AM Best to discuss COVID-19’s impact on claims adjusting and automation. You can listen to the podcast below:
We are getting closer to reporting year-end 2020 results. Stay tuned for October results to see the latest trends.
Note: All percentages are based on a 12-month rolling year over year % change.