Rising Auto Bodily Injury Claim Payments: Study Insights
A recent study by the Insurance Research Council (IRC) reveals that average payments for auto bodily injury claims in the U.S. grew at a rate more than double that of medical care inflation from 2017 to 2022.
The IRC's comprehensive analysis used data from its Auto Injury Claims Analytics Database, which includes over 7.4 million auto injury claims from nine insurers, covering about 43% of the U.S. private passenger auto market. This extensive dataset provides critical insights into claim payment structures, the role of legal involvement, and the escalating medical expenses contributing to this trend. The findings are particularly relevant for insurance professionals striving to understand the dynamics of rising claim costs, especially as they advise clients on policy pricing and risk assessment.
Key Findings from the IRC Study
During the five-year period, average payments for bodily injury claims rose significantly, from approximately $14,000 in 2017 to over $20,000 in 2022, marking an annual increase of 7.8%. A notable contributing factor to this escalation is the rise in general damages—elements of settlements that cover non-economic factors such as pain and suffering—augmenting the medical costs of claims. This shift underscores a critical trend where medical expenses are more of a multiplier rather than a fixed cost.
The data also shows a significant increase in attorney involvement, with represented claimants rising from 40% in 2017 to nearly 50% in 2022. Litigation rates have nearly doubled, increasing from 10% to 18% of all claimants. These trends indicate a growing complexity in handling claims, which poses additional challenges for insurers managing underwriting risks and cost projections.
Understanding the Impact on the Insurance Industry
Patrick Schmid, president of the IRC, emphasized the database's role in offering a detailed understanding of rising claim costs. "Rising medical costs, enhanced by general damage settlements, alongside increased attorney involvement and litigation, are contributing to the sustained upward pressure on claim severity and consequently on insurance affordability for consumers," Schmid noted. For insurance brokers, this data is invaluable for providing clear, evidence-based explanations to clients facing premium increases despite having clean driving records.
The study underscores the argument, long advanced by insurer trade groups, that legal system exploitations are among key factors that affect affordability. Claims executives have highlighted third-party litigation funding and large verdicts as significant cost drivers. The IRC's findings lend empirical support to these concerns, which were previously mainly based on industry observations and surveys.
Looking Ahead
Although the dataset covers claims only through mid-2022, additional data from CCC Intelligent Solutions suggests that this trend persists, with bodily injury claim severity rising 10.3% year-over-year into 2025. The industry must continue to grapple with the implications of these rising costs as they affect pricing strategies, regulatory compliance, and consumer trust. The ongoing escalation in bodily injury claim settlements indicates a critical need for stakeholders to adopt strategies that mitigate this financial pressure while enhancing claims management efficiencies.