Coronavirus lockdowns in the U.S. dramatically impacted quarterly claims and losses in the first half of 2020. Earned car years, however, continued to grow.
The latest available Fast Track Monitoring system data from the Independent Statistical Service Inc. (ISS) quantifies the historic impact of coronavirus lockdowns on private passenger collision claims and losses during the second quarter of 2020 compared to the previous year.
Collision coverage claims for second quarter of 2020 were down 36.3% compared to the second quarter of 2019 as large parts of the country were under strict stay at home orders. The second quarter result follows a 5.7% decline in the first quarter hit by stay-at-home orders starting in mid-to-late March.
For the first six months of 2020, collision coverage claims were down over 681,000, or 20.5%, compared to 2019.
This draws a stark comparison to both the third and fourth quarters of 2019 that had been up versus 2018. The results in the third and fourth quarter last year broke a string of eight quarterly declines that started in the third quarter of 2017 compared to the same quarter in 2016.
For the year ending on the second quarter of 2020 collision claims were down 9.7%, a decrease of 9 percentage points from the year ending in the first quarter that was down 1.7%.
Losses on collision coverage claims were down $2.9 billion, or 47.5%, in the second quarter compared to 2019. For the first half of 2020, claims were down $3.1 billion, or 23.5%, compared to last year.
Losses on a year ending basis were down nearly $2.5 billion for the year ending in the second quarter of 2020 compared to the year ending in the second quarter of 2019. The year ending in the second quarter was down $2.9 billion compared to the year ending in the first quarter.
The number of collision claims had grown in every quarter since 2012 on a quarterly basis compared to the previous quarter until the third quarter of 2017.
The third quarter of 2019 marked the end of quarter-on-quarter declines on a year ending basis after seven of the last eight quarters declined versus the previous quarter with one flat quarter.
Average growth in the year ending in the second quarters from 2013-2020 is 1.5%. It peaked in the year ending the third quarter of 2014 at 9.6% above 2013 levels.
Collision claims frequency, at 3.54 claims per 100 earned car years in the second quarter of 2020, decreased 37.46% compared to second quarter of 2019. Claim frequency was 5.68 in the first quarter compared to 2019 and was 5.81 in the fourth quarter of 2019.
Data for the year ending in the second quarter of 2020 shows that collision claims frequency was 5.21 claims per 100 earned car years, down 11.09% compared to the year ending in the second quarter of 2019.
It is important to note that the $23.4 billion in losses for the year ending in the second quarter of 2020 are for just private passenger physical damage collision coverage and is a proxy for the growth in the overall collision repair market.
Including both insurance and customer pay in the U.S., CollisionWeek estimated revenue exceeded $48.8 billion for the industry in 2018 with more than $44.7 billion at both independent and OEM dealer employer firms.
Private passenger comprehensive losses totaled $11.1 billion for the year ending in the second quarter of 2020. Private passenger liability property damage losses totaled $18.5 billion during the period.
The average paid collision claim cost stood at $3,914 for the 12-month period ending in the second quarter of 2020, up just 0.1% compared to $3,910 for the 12 months ending in the second quarter of 2019. While paid claim cost is higher than repaired claim costs due to the impact of total losses, the claim cost provides an indication on the growth trend in severity.
On a quarterly basis, paid collision claim cost was $3,124 in the second quarter, down 17.6% compared to the second quarter of 2019.
There were over 584,000 fewer collision claims in the second quarter of 2020 compared to the previous year. This comes on the heels of the over 97,000 claims decline in the first quarter compared to 2019.
While claims and losses declined substantially, programs by insurers to provide credits and refunds on premiums, and not cancel insurance while stay at home orders were in place, buoyed earned car years that were up 1.5% in the year ending in the second quarter of 2020 compared to the same period the previous year.
The earned car years statistic provides an important measure of the size of the insured vehicles in operation that is a critical component for collision repair volume. While car sales declined substantially when many areas of the country closed dealership new car sales departments, since then sales have recovered and have exceeded previous year levels in recent months.
The growth in earned car years for private passenger collision coverage had been declining since its most recent high in the fourth quarter of 2015. Earned car years has now seen five straight quarters of increasing growth on a year ending basis.
Tracking the health of earned car years will be critical as insurance company customer payment relief programs expire and the burdens of higher unemployment during the pandemic force consumers to reduce vehicle ownership and their insurance coverage.
Monthly claims statistics published by CCC Information Services indicate that repairable claims in the third quarter and first month of the fourth quarter continue to be substantially below year ago levels across most areas of the country.