Upload
taryn-coxson
View
213
Download
0
Tags:
Embed Size (px)
Citation preview
Auto Insurance Success Stories
Casualty Loss Reserve SeminarCasualty Loss Reserve SeminarSeptember 12-14, 2005September 12-14, 2005
PENNSYLVANIA ACT 6: A RETROSPECTIVE REVIEW
Casualty Loss Reserve SeminarCasualty Loss Reserve SeminarSeptember 12-14, 2005September 12-14, 2005
By Kevin Russell, FCASBy Kevin Russell, FCASERIE INSURANCE GROUPERIE INSURANCE GROUP
Part 1: Originally Presented as“Auto Managed Care: Pennsylvania’s
Act 6 of 1990”
By Chet SzczepanskiBy Chet Szczepanski
Agenda
Review economic and social background leading Review economic and social background leading to Act 6to Act 6
Review legislative background leading to Act 6Review legislative background leading to Act 6 Review specifics of Act 6Review specifics of Act 6 Examine loss cost saving effects of medical cost Examine loss cost saving effects of medical cost
containment features implemented by Act 6containment features implemented by Act 6 Examine impact on loss development and Examine impact on loss development and
reservingreserving
Economic & Social Background
Climate of the 1970’s and 1980’s:Climate of the 1970’s and 1980’s:– High rates of inflation throughout period, High rates of inflation throughout period,
especially medical inflationespecially medical inflation– Society becoming increasingly litigious, Society becoming increasingly litigious,
particularly in large population centers particularly in large population centers such as Philadelphiasuch as Philadelphia
Economic & Social Background(continued)
Insurance Marketplace in the 1970’s and Insurance Marketplace in the 1970’s and 1980’s1980’s– Persistent rate increases outpacing rates of Persistent rate increases outpacing rates of
inflationinflation– Rate increases consistently in the double Rate increases consistently in the double
digits in Philadelphiadigits in Philadelphia– Considerable public discontent Considerable public discontent – Clamor for increased regulatory scrutiny & Clamor for increased regulatory scrutiny &
controlcontrol
Legislative Background
July 19, 1974: Legislature enacts July 19, 1974: Legislature enacts Pennsylvania No-Fault Motor Vehicle Pennsylvania No-Fault Motor Vehicle Insurance ActInsurance Act– Key Features:Key Features:
Unlimited Medical CoverageUnlimited Medical Coverage $750 Monetary Threshold to Bring Suit$750 Monetary Threshold to Bring Suit
Legislative Background(Continued)
– Inflation quickly erodes effectiveness of Inflation quickly erodes effectiveness of $750 monetary threshold$750 monetary threshold
– Ineffective threshold and unlimited medical Ineffective threshold and unlimited medical coverage are catalyst for increased suit coverage are catalyst for increased suit activity and, in turn, excessive medical activity and, in turn, excessive medical usage to perfect claims usage to perfect claims
Legislative Background(Continued)
October 1, 1984: Pennsylvania October 1, 1984: Pennsylvania Legislature repeals No-Fault Motor Legislature repeals No-Fault Motor Vehicle Insurance Act and enacts Motor Vehicle Insurance Act and enacts Motor Vehicle Financial Responsibility LawVehicle Financial Responsibility Law
Key Features:Key Features: Tort System with add-on First Party BenefitsTort System with add-on First Party Benefits Medical Coverage now limited (minimum limit Medical Coverage now limited (minimum limit
$10,000 Medical Benefits)$10,000 Medical Benefits)
Legislative Background(Continued)
To compensate for such severely reduced To compensate for such severely reduced Medical Benefit coverage, Automobile Medical Benefit coverage, Automobile Catastrophic Loss Trust Fund establishedCatastrophic Loss Trust Fund established
– Coverage from $100,000 to $1,000,000Coverage from $100,000 to $1,000,000
– A State Fund (Not a private sector program)A State Fund (Not a private sector program)
– Mandatory ParticipationMandatory Participation
– Funded on a pay as you go basisFunded on a pay as you go basis
– initial “Fee” $5.00initial “Fee” $5.00
– Fee paid with annual automobile registrationFee paid with annual automobile registration
– As “Fee” increases, considerable discontentAs “Fee” increases, considerable discontent
– As Fee hits $25.00, Letter to the Editor states: “I don’t have As Fee hits $25.00, Letter to the Editor states: “I don’t have a cat, what do I need a Cat Fund for?”a cat, what do I need a Cat Fund for?”
Legislative Background(Continued)
Quite possibly worst possible system from a cost Quite possibly worst possible system from a cost perspective:perspective:
– Tort system without limit to suits combined Tort system without limit to suits combined with add-on first party benefitswith add-on first party benefits
– Mandatory uninsured/underinsured motorists Mandatory uninsured/underinsured motorists coverage, which courts rule can be stackedcoverage, which courts rule can be stacked
Combined effects of increased suit activity and Combined effects of increased suit activity and accelerating inflation leads to even greater and accelerating inflation leads to even greater and more frequent rate increasesmore frequent rate increases
Legislative Background(Continued)
Governor Robert P. Casey takes office Governor Robert P. Casey takes office in January, 1987in January, 1987
A populist governor, he makes auto A populist governor, he makes auto insurance reform one of his major insurance reform one of his major legislative goalslegislative goals
Legislative Background(Continued)
Governor Casey introduces a comprehensive Governor Casey introduces a comprehensive auto insurance reform package in early 1988auto insurance reform package in early 1988
– No-Fault system with $10,000 monetary No-Fault system with $10,000 monetary thresholdthreshold
– 80% of bodily injury claims have 80% of bodily injury claims have associated medical costs less than associated medical costs less than $10,000 $10,000
Casey’s proposal fails to gain substantive Casey’s proposal fails to gain substantive support from any constituencysupport from any constituency
Legislative Background(Continued)
Constituencies (Depending on the Constituencies (Depending on the reform package, they can be either reform package, they can be either obstacles or facilitators)obstacles or facilitators)– The PublicThe Public– The LegislatureThe Legislature– The Insurance IndustryThe Insurance Industry– The Trial BarThe Trial Bar– The Medical CommunityThe Medical Community
Legislative Background(Continued)
December 12, 1988: Pennsylvania Legislature December 12, 1988: Pennsylvania Legislature Repeals Automobile Catastrophic Loss Trust FundRepeals Automobile Catastrophic Loss Trust Fund
Institutes runoff of current claims to be funded by Institutes runoff of current claims to be funded by surcharge on driving violation feessurcharge on driving violation fees
Mandates that insurance marketplace offer Mandates that insurance marketplace offer Extraordinary Medical Benefit Coverage for Extraordinary Medical Benefit Coverage for voluntary purchasevoluntary purchase
Coverage similar to original Cat FundCoverage similar to original Cat Fund Initial actuarial cost $45.00Initial actuarial cost $45.00
Legislative Background(Continued)
February 7, 1990: Governor Casey February 7, 1990: Governor Casey signs into law Act 6 of 1990 which signs into law Act 6 of 1990 which substantially modifies the Motor Vehicle substantially modifies the Motor Vehicle Financial Responsibility LawFinancial Responsibility Law
A “Choice No-Fault” SystemA “Choice No-Fault” System
Act 6 of 1990
Key FeaturesKey Features– Policyholders can voluntarily restrict their ability Policyholders can voluntarily restrict their ability
to seek recovery for non-economic damages, to seek recovery for non-economic damages, such as pain and suffering, to only those cases such as pain and suffering, to only those cases resulting in death, serious impairment of bodily resulting in death, serious impairment of bodily function, or permanent serious disfigurement.function, or permanent serious disfigurement.
– Policyholders are prohibited from recovering for Policyholders are prohibited from recovering for economic damages under other insurance economic damages under other insurance coverage, such as Accident & Health Insurancecoverage, such as Accident & Health Insurance
Act 6 of 1990
Key Features (continued)Key Features (continued)– Increased uninsured motorist detection Increased uninsured motorist detection
effortsefforts– Increased anti-fraud measuresIncreased anti-fraud measures
Penalties for insurance fraud stiffened from a Penalties for insurance fraud stiffened from a misdemeanor to a third degree felonymisdemeanor to a third degree felony
Act 6 of 1990
Key Features (continued)Key Features (continued)– Auto insurers’ medical benefit payments Auto insurers’ medical benefit payments
are controlled by generally limiting are controlled by generally limiting providers to 110% of the prevailing fee providers to 110% of the prevailing fee available under Medicare.available under Medicare.
– Insurers must contract with peer-review Insurers must contract with peer-review organizations to more effectively evaluate organizations to more effectively evaluate the reasonableness and necessity of the reasonableness and necessity of medical services and treatment.medical services and treatment.
Act 6 of 1990
Key Features (continued)Key Features (continued)– MANDATORY RATE ROLLBACKS!MANDATORY RATE ROLLBACKS!
Constituencies (Revisited)
–The PublicThe Public
–The LegislatureThe Legislature
–The Insurance IndustryThe Insurance Industry
–The Trial BarThe Trial Bar
–The Medical CommunityThe Medical Community
Chet’s CONCLUSIONS
Act 6 enacted because a successful Act 6 enacted because a successful coalition of constituencies formedcoalition of constituencies formed
Act 6, especially Choice Features and Act 6, especially Choice Features and Medical Cost Containment Features, a Medical Cost Containment Features, a big successbig success
Such law changes have substantial Such law changes have substantial effects on actuarial analyseseffects on actuarial analyses
Part 2: PENNSYLVANIA ACT 6 A RETROSPECTIVE REVIEW
Updated 8/2005
Updated 8/2005- How Were Auto Coverages Affected?
Rollbacks: Limited vs. Full Tort OptionRollbacks: Limited vs. Full Tort Option Lower Minimum/Optional CoveragesLower Minimum/Optional Coverages Mandatory Discounts/DeductiblesMandatory Discounts/Deductibles Utilization of Medical Fee ScheduleUtilization of Medical Fee Schedule Elimination of Duplicate RecoveriesElimination of Duplicate Recoveries Coverage Restrictions on Coverage Restrictions on
Impaired/Fraudulent DriversImpaired/Fraudulent Drivers
Update 8/2005: How Were Auto Coverages Affected?
Rollbacks: Limited vs. Full Tort OptionRollbacks: Limited vs. Full Tort Option– Coverages affected: All coverages (including Coverages affected: All coverages (including
Comp and Coll)Comp and Coll)– Coverage Impact: Rate reduction-10% for full tort, Coverage Impact: Rate reduction-10% for full tort,
22% for limited tort22% for limited tort– Loss Cost component affected: Frequency- Loss Cost component affected: Frequency-
selecting limited tort option limits the ability to selecting limited tort option limits the ability to recover non-economic damages such as pain and recover non-economic damages such as pain and suffering. However, company exposure is not suffering. However, company exposure is not necessarily reduced since limited tort electors can necessarily reduced since limited tort electors can still be sued in court by full tort electorsstill be sued in court by full tort electors
Update 8/2005: How Were Auto Coverages Affected?
Lower Minimum/Optional CoveragesLower Minimum/Optional Coverages– Coverages affected: FPB, wage loss/ Coverages affected: FPB, wage loss/
funeral/UMUIMfuneral/UMUIM– Coverage Impact: Min FPB lowered from Coverage Impact: Min FPB lowered from
10k to 5k, wage loss/funeral/UMUIM 10k to 5k, wage loss/funeral/UMUIM optionaloptional
– Loss Cost component affected: Frequency Loss Cost component affected: Frequency (if decline optional coverages), Severity (if (if decline optional coverages), Severity (if FPB coverage reduced)FPB coverage reduced)
Update 8/2005: How Were Auto Coverages Affected?
Mandatory Discounts/DeductiblesMandatory Discounts/Deductibles– Coverages affected: AllCoverages affected: All– Coverage Impact:Coverage Impact:
FPB: 15% passive seatbelts, 20% driver side airbag, 30% 2 FPB: 15% passive seatbelts, 20% driver side airbag, 30% 2 airbagsairbags
Comp: 10% anti-theft devicesComp: 10% anti-theft devices Comp/Coll: Mandatory $500 ded (can request lower)Comp/Coll: Mandatory $500 ded (can request lower) All coverages: 5% for driver’s training course (55+)All coverages: 5% for driver’s training course (55+)
– Loss Cost component affected: Frequency (higher ded/ Loss Cost component affected: Frequency (higher ded/ increase in anti-theft devices/ driver training should lead to increase in anti-theft devices/ driver training should lead to decrease), Severity (higher ded leads to increase, increase decrease), Severity (higher ded leads to increase, increase in driver safety devices leads to severity decrease)in driver safety devices leads to severity decrease)
Update 8/2005: How Were Auto Coverages Affected?
Utilization of Medical Fee ScheduleUtilization of Medical Fee Schedule– Coverages affected: BI, FPB, UMUIMCoverages affected: BI, FPB, UMUIM– Coverage Impact: Pay no more than 110% Coverage Impact: Pay no more than 110%
of the prevailing charge at the 75th of the prevailing charge at the 75th percentile (physician services)percentile (physician services)
– Loss Cost component affected: SeverityLoss Cost component affected: Severity
Update 8/2005: How Were Auto Coverages Affected?
Elimination of Duplicate RecoveriesElimination of Duplicate Recoveries– Coverages affected: BI, UMUIMCoverages affected: BI, UMUIM– Coverage Impact: Auto coverage is Coverage Impact: Auto coverage is
normally the primary coverage, however, normally the primary coverage, however, WC coverage could be primary for some WC coverage could be primary for some claimsclaims
– Loss Cost component affected: FrequencyLoss Cost component affected: Frequency
Update 8/2005: How Were Auto Coverages Affected?
Coverage Restrictions on Impaired/ Coverage Restrictions on Impaired/ Fraudulent DriversFraudulent Drivers– Coverages affected: BI, FPB, UMUIMCoverages affected: BI, FPB, UMUIM– Coverage Impact:Coverage Impact:
Bars recovery for drivers under the influence of drugs/ Bars recovery for drivers under the influence of drugs/ alcoholalcohol
Tougher enforcement against uninsured motoristsTougher enforcement against uninsured motorists Auto Ins. fraud goes from misdemeanor to third degree Auto Ins. fraud goes from misdemeanor to third degree
felony offensefelony offense
– Loss Cost component affected: FrequencyLoss Cost component affected: Frequency
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 - 2000Erie Insurance Group 1988 - 2000Personal Voluntary Auto Average Case Inc LOSS - BI
8,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
12,000
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
Ave C
ase I
nc
PA CW
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 - 2000Erie Insurance Group 1988 - 2000Personal Voluntary Auto Frequency - BI
4.0%
6.0%
8.0%
10.0%
12.0%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
Cla
ims/E
xp
osu
re
PA CW
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 - 2000Erie Insurance Group 1988 - 2000Personal Voluntary Auto Average Case Inc LOSS - NoFault
2,000
2,500
3,000
3,500
4,000
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
Ave C
ase I
nc
PA CW
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 - 2000Erie Insurance Group 1988 - 2000Personal Voluntary Auto Frequency - NoFault
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
Cla
ims/E
xp
osu
re
PA CW
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 - 2000Erie Insurance Group 1988 - 2000Personal Voluntary Auto Average Case Inc LOSS - UMUIM
15,000
20,000
25,000
30,000
35,000
40,000
45,000
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
Ave C
ase I
nc
PA CW
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 - 2000Erie Insurance Group 1988 - 2000Personal Voluntary Auto Frequency - UMUIM
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
Cla
ims/E
xp
osu
re
PA CW
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 - 2000Erie Insurance Group 1988 - 2000Personal Voluntary Auto Average Case Inc LOSS - COMP
400
500
600
700
800
900
1,000
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
Ave C
ase I
nc
PA CW
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 - 2000Erie Insurance Group 1988 - 2000Personal Voluntary Auto Frequency - COMP
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
120.0%
130.0%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
Cla
ims/E
xp
osu
re
PA CW
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 - 2000Erie Insurance Group 1988 - 2000Personal Voluntary Auto Average Case Inc LOSS - COLL
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
Ave C
ase I
nc
PA CW
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 - 2000Erie Insurance Group 1988 - 2000Personal Voluntary Auto Frequency - COLL
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
Cla
ims/E
xp
osu
re
PA CW
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 - 2000 Erie Insurance Group 1988 - 2000 Personal Vol Auto BI - PA Paid LOSS Personal Vol Auto BI - PA Paid LOSS ATA Factors
@12-@24 @24-@36 @36-@481988 4.700 1.655 1.207 1989 5.018 1.582 1.179 1990 4.339 1.631 1.164 1991 4.753 1.614 1.169 1992 4.639 1.633 1.169 1993 5.553 1.737 1.153 1994 5.793 1.538 1.133 1995 4.293 1.570 1.147 1996 5.108 1.547 1.177 1997 5.056 1.735 1.199 1998 4.707 1.753 1.210 1999 5.094 1.696 1.232 2000 4.300 1.793 1.236
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 - 2000 Erie Insurance Group 1988 - 2000 Personal Vol Auto No-Fault - PA Paid LOSS Personal Vol Auto No-Fault - PA Paid LOSS ATA Factors
@12-@24 @24-@36 @36-@481988 1.778 1.091 1.037 1989 1.741 1.093 1.037 1990 1.681 1.098 1.037 1991 1.618 1.083 1.031 1992 1.642 1.076 1.037 1993 1.552 1.080 1.028 1994 1.574 1.077 1.031 1995 1.566 1.069 1.027 1996 1.569 1.076 1.027 1997 1.578 1.068 1.025 1998 1.538 1.071 1.032 1999 1.582 1.079 1.031 2000 1.555 1.062 1.029
Update 8/2005: A Retrospective Review
Erie Insurance Group 1988 – 2000 Erie Insurance Group 1988 – 2000 Personal Vol Auto UMUIM - PA Paid LOSS Personal Vol Auto UMUIM - PA Paid LOSS ATA Factors
@12-@24 @24-@36 @36-@481988 8.029 1.795 1.274 1989 5.611 1.942 1.317 1990 7.970 1.855 1.371 1991 5.592 1.952 1.310 1992 6.382 2.048 1.438 1993 10.223 2.264 1.267 1994 7.476 1.879 1.410 1995 5.628 1.825 1.422 1996 6.140 1.649 1.215 1997 8.302 1.905 1.366 1998 7.226 1.939 1.357 1999 5.988 1.834 1.480 2000 5.812 1.928 1.416
First Party BenefitsArising Claim Frequency
0.0000
0.5000
1.0000
1.5000
2.0000
2.5000
3.0000
3.5000
Year & Quarter
Fre
qu
en
cy
Pennsylvania Arising Claim Frequency Countrywide Arising Claim Frequency
First Party BenefitsAverage Paid Loss
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
Year & Quarter
Avera
ge P
aid
Lo
ss
Pennsylvania Average Loss Countrywide Average Loss
Medical Incurred Development12 24 36 48 60 72 84 96 108
1977 1978 1979 1980 1.02681981 1.0365 1.06611982 1.0212 1.0716 1.04881983 1.0115 1.0645 1.0738 0.99031984 1.0976 1.1936 1.1243 1.0318 0.99951985 1.0685 1.1233 1.0635 0.9796 0.9856 0.94101986 1.2164 1.1604 1.0562 1.0259 0.9908 1.0134 1.00631987 1.9811 1.2022 1.1074 1.0371 1.0196 1.0109 0.9975 1.06101988 1.9144 1.2666 1.0920 1.0301 1.0382 0.9920 1.0017 0.99951989 1.6970 1.2441 1.1039 1.0478 1.0153 1.0006 1.0061 1.01041990 1.8667 1.1970 1.1231 1.0346 1.0643 1.0089 1.0172 1.00731991 1.8786 1.2042 1.0627 1.0190 1.0203 1.0117 1.0277 1992 1.9160 1.1091 1.0638 1.0197 1.0294 1.0062 1993 1.4730 1.1389 1.0554 1.0285 1.0049 1994 1.7146 1.0540 1.0574 0.9995 1995 1.5063 1.1199 1.0464 1996 1.5621 1.1011 1997 1.4729
Medical Paid Development12 24 36 48 60 72 84 96 108
1977 1978 1979 1980 1.03021981 1.0318 1.02221982 1.0331 1.0388 1.04241983 1.0179 1.0427 1.0277 1.03501984 1.0758 1.0723 1.0596 1.0735 1.04521985 1.1110 1.0670 1.0495 1.0361 1.0345 1.00651986 1.2004 1.1145 1.0689 1.0650 1.0639 1.0491 1.01781987 2.0837 1.2111 1.1031 1.0763 1.0751 1.0545 1.0243 1.01951988 2.3803 1.2223 1.1415 1.1081 1.0816 1.0331 1.0288 1.01661989 2.0436 1.2819 1.1850 1.1002 1.0420 1.0289 1.0234 1.01441990 2.5618 1.2834 1.1544 1.0604 1.0346 1.0296 1.0212 1.01901991 2.3714 1.2319 1.0809 1.0457 1.0362 1.0248 1.0235 1992 2.2078 1.1483 1.0741 1.0428 1.0379 1.0284 1993 1.7344 1.1516 1.0794 1.0496 1.0296 1994 1.8878 1.1573 1.0840 1.0603 1995 1.7767 1.1451 1.0778 1996 1.7839 1.1621 1997 1.6956 1998
Update 8/2005: Other Factors
Act 6 applies to all policies issued or renewed Act 6 applies to all policies issued or renewed after July 1, 1990. Should Act 6 get all the after July 1, 1990. Should Act 6 get all the credit? What about…credit? What about…– Increase in Gas Prices?Increase in Gas Prices?– Annual Highway Miles Driven?Annual Highway Miles Driven?– Increase in PA Unemployment Rate?Increase in PA Unemployment Rate?– Shift in Types of Cars Driven?Shift in Types of Cars Driven?– Slowing Settlement Rates?Slowing Settlement Rates?– Other Factors?Other Factors?
Update 8/2005: Other Factors
Increase in Gas Prices? Increase in Gas Prices? (Source: (Source: www.bls.govwww.bls.gov))
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
Total U.S Eastern States
Update 8/2005: Other Factors
Increase in Gas Prices? Increase in Gas Prices? (Source: (Source: www.bls.govwww.bls.gov))
$0.80
$0.85$0.90
$0.95$1.00
$1.05$1.10
$1.15$1.20
$1.25
Total U.S Eastern States
Update 8/2005: Other Factors
Annual Highway Miles Driven? Annual Highway Miles Driven? (Source: (Source:
www.fhwa.dot.govwww.fhwa.dot.gov))
Annual Highway Miles of Travel
1,500,000
1,700,000
1,900,000
2,100,000
2,300,000
2,500,0001985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
Year
Miles
Miles of Travel
Update 8/2005: Other Factors
Increase in PA Unemployment Rate? Increase in PA Unemployment Rate? (Source: (Source:
www.bls.govwww.bls.gov))
4.0%4.5%5.0%5.5%6.0%6.5%7.0%7.5%8.0%
Total U.S. PA
Update 8/2005: Other Factors
Increase in PA Unemployment Rate? Increase in PA Unemployment Rate? (Source: (Source:
www.bls.govwww.bls.gov))
4.0%4.5%5.0%5.5%6.0%
6.5%7.0%7.5%8.0%
Total U.S. PA
Update 8/2005: Other Factors
Shift in Types of Cars Driven? Shift in Types of Cars Driven? (Source: www.eia.doe.gov)(Source: www.eia.doe.gov)
Update 8/2005: Other Factors
Shift in Types of Cars Driven? Shift in Types of Cars Driven? (Source: www.eia.doe.gov)(Source: www.eia.doe.gov)
– Light trucks' share of total vehicle-miles traveled Light trucks' share of total vehicle-miles traveled rose from one-fourth in 1988 to one-third in 1994rose from one-fourth in 1988 to one-third in 1994
– Two segments of the light truck fleet--minivans Two segments of the light truck fleet--minivans and sport utility-vehicles-were driven more miles and sport utility-vehicles-were driven more miles per year per vehicle than were passenger cars. per year per vehicle than were passenger cars.
Update 8/2005: Other Factors
Slowing Settlement Rates?Slowing Settlement Rates?– Auto insurers’ medical benefit payments are Auto insurers’ medical benefit payments are
limited to 110% of the prevailing fee available limited to 110% of the prevailing fee available under Medicare.under Medicare.
– Insurers must contract with peer-review Insurers must contract with peer-review organizationsorganizations
– Learning curve: Claims departments now have to Learning curve: Claims departments now have to access cost of injuries against fee scheduleaccess cost of injuries against fee schedule
– Result: Settlement rates slow, paid losses Result: Settlement rates slow, paid losses artificially lowered artificially lowered
Update 8/2005: Other Factors
Other Factors?Other Factors?– Operation Desert Storm (January 17, 1991)Operation Desert Storm (January 17, 1991)– Increase in average age/experience of driver?Increase in average age/experience of driver?– Increase in the involuntary market in PA Increase in the involuntary market in PA
(Voluntary market results appear better)?(Voluntary market results appear better)?– Luck?Luck?– What else?What else?