Sport Utility Vehicles And Auto Insurance Costs

2001 Lincoln Navigator

Session PL-30

Sport Utility Vehicles• Chevy Suburban• Jeep Grand Cherokee• Ford Explorer• Lincoln Navigator• Ford Expedition• Toyota Land Cruiser• Mercedes-Benz ML320• Dodge Durango• Ford Excursion 2001 Ford

Excursion

1935 Chevy Suburban

Sport Utes Of The Future• Sport Utility Trucks -Intersection of

a Pickup Truck and SUV

2002 Lincoln Blackwood SUT

What’s The ProblemWith SUVs? • Some groups critical of SUVs

– SUV Anti-Fan Club– Sierra Club– Friends of the Earth

•Road Hog Info Trough

– Consumers Union•Concerns with rollovers

What’s The ProblemWith SUVs?

• Too big - take too much space

• Hard to see around

• High fuel consumption

• Pollute more

What’s The ProblemWith SUVs?

• Exempt from gas guzzler tax

• Bumper mismatch with cars

• Pose greater risk of loss to

cars

• Higher rollover potential

NHTSA Rollover Info• More than 10,000 people die

every year in rollovers

• Over 60% of SUV occupant deaths in 1999 were rollovers, cars only 23%

• 80% killed in single-vehicle rollovers were unbelted

• Belted occupants have 75% less chance of being killed in rollover

New NHTSA RolloverRisk Ratings

5 Stars < 10%

4 Stars10% - 20%

3 Stars 20% - 30%

2 Stars 30% - 40%

1 Stars > 40%

New NHTSA RolloverRisk Ratings• Best rating: Honda Accord• Worst rating: Chevy Blazer and

GMC Jimmy/Envoy• SUVs had lowest rankings

1 - 3 stars• Most cars had highest rankings

4 stars

Factors Affecting Auto Insurance Costs Size, weight, and bumper

mismatch with carsHeight: 73”

Weight: 5,293 Pounds Height: 54.7”

Weight: 2,676 Pounds

Chevy Suburban Chevy Cavalier

Factors Affecting SUV Insurance Costs

• Rising popularity- Changing mix

• Many are 4 wheel drive

• Longer stopping distances

• Stiffer ladder frames vs unibody– don’t collapse, more force

into vehicle it hits

This is what happened when Chevy S10 with full ladder frame hit Pontiac Grand Prix with unibody.

Factors Affecting SUV Insurance Costs

• More horsepower

• Higher theft potential

• Use of vehicle

• Higher rollover potential

• Driver demographics

• Mix of coverages

Current SUV Rating Practices• Insurers commonly vary physical

damage rates for repairability and damageability, theft potential

• Most do not vary liability rates

• Some have started to vary liability

• Others say data does not support

Light trucks include full-size vans, minivans, pickups and sport utility vehicles

Light Truck GrowthPercent Of All New U.S. Auto

Sales

15%

20%

33%

49%

1970 1980 1990 2000

Change in U.S Auto Sales2000 vs. 1999

1.7%

3.8%

9.4%

2.7%

Cars Light Truck

s

TotalSUVs

2000 Light Truck Sales

Pickups38%

SUVs41%

Vans21%

2000 US New Light Truck Sales - 8.5 Million

Growth of SUVs

929,000

1,750,000

3,500,000

1990 1995 2000

Sport Utility Vehicle SalesU.S. Market

2000 US New Auto Sales

Cars51%

SUVs20%

Pickups Vans29%

2000 US New Auto Sales - 17.3 Million

Top 10 Selling Vehicles 1 . Ford F-Series PK 2. Chevrolet C/K PK 3. Ford Explorer 4. Toyota Camry

5. Honda Accord 6. Ford Taurus

7. Dodge Ram PK 8. Ford Ranger PK 9. Honda Civic

10. Ford Focus

12 Months 2000 US Auto Sales

Who Needs SUV?

– Heavy-duty•GMC and Chevy Suburban•New Ford Excursion

– Compact sport utilities•Explorer and Jeep Grand Cherokee

– Full size utilities•Chevy Tahoe, Ford Bronco and Ford Expedition

• Three major segments of SUVs

Who Needs SUV?

– Heavy-duty wagons for•9 passenger seating•Larger cargo capacity•Towing

– Compact sport utilities for•More room, greater towing and cargo space due to larger family

•Those requiring

Who Needs SUV?

– Minivan owners who need nine-passenger seating and who find the styling and image of SUV appealing

– Crossovers from luxury cars, station wagons and even pickups

•Those who currently are

Who Buys SUVs?

– Median age is 40 to 50 years

– Median annual income is

$85,000+

– 60% are college graduates

– 40% are women

– 85% are married

• For Ford Expedition (Considered Full Size)

Who Buys SUVs?

– Suburban families with teenage children who reject minivans and shun station wagons

– Rural families who need vehicle to go to town as well as travel off-road

– Empty-Nesters who lead active lives and need towing or just to visit grandchildren

• Three major groups of buyers

Who Buys SUVs?

– Families with 5+ members twice as likely to buy full size

– 53% of full size buyers use vehicle frequently for hunting, fishing or camping, 24% for compact

• Expedition vs Explorer Full size vs compact

Who Buys SUVs?

– 48% of full size for towing, 16% for compact

– 33% of full size for off-road, 14% for compact

• Expedition vs Explorer Full size vs compact

Who Buys SUVs?

Mature18%

Baby Boomers

60%

Gen-Xers22%

What’s The Problem With SUVs?• Safety issues

– Large vehicle striking small vehicles

– Greater risk to occupants of smaller vehicles

– Risk of death in car vs. pickup/SUV crash is 4 times greater for those in car

What’s The Problem With SUVs?

• Safety issues

– Are smaller cars safe enough?

– Does Detroit need to change?

The Most Capable SUV Ever?

This is what really happened in the Winter of 2000 to one of those go anywhere SUVs.

What’s The Problem With SUVs?• Does data support different

rating?– Changing mix of cars vs. light trucks

•Of vehicles on the road, 65% are cars, 35% are pickups, SUVs, and vans.

•New vehicle sales split about 50/50.

•8% of vehicles on the road are SUVs.

•20% of new vehicle sales are SUVs.

What’s The Problem With SUVs?

• Does data support different rating?

– Need to consider factors affecting both frequency and severity

– Physical Damage (Comp vs. Coll)

•Expect higher Theft Losses

•Lower Coll Losses

What’s The Problem With SUVs?• Does data support different

rating?– Liability (BI/PD vs. Med Pay, PIP)•Expect higher BI/PD losses

•Expect lower Med Pay/PIP losses

•What is the net result?

•How does it vary by SUV model?

•By 2wd vs. 4wd?

•What about cars, pickups and vans?

What’s The Problem With SUVs?• Does data support different

rating?– Mix of coverages, limits,

deductibles affects overall rate adjustments.

– These can vary depending upon the type of business written. •Preferred, Standard, Non-Standard

•Rural vs. Suburban vs. Urban•Youthful vs. Adult vs. Senior Adult

•By Region, By State

Panelist:• Kim Hazelbaker

– Senior Vice President with Highway Loss Data Institute (HLDI)

– HLDI publishes motor vehicle insurance loss data, performs crash tests

– Holds a masters degree in economics and statistics and a bachelors in business from the University of Missouri

Sport Utility Vehicles And Auto Insurance Costs

2002 Chevy Trailblazer

Session PL-30