Electric Vehicles and Risky Drivers: New Challenges for Auto Insurers

New Risks in Auto Insurance: The Impact of EVs and Risky Driving

In an evolving auto insurance landscape, insurers are facing new challenges brought on by electric vehicles (EVs) and persistent risky driving behaviors. According to the 2024 U.S. Auto Insurance Trends Report from LexisNexis Risk Solutions, these factors are significantly influencing the market.

The report reveals that high claim severities, risky driving behaviors, and the increasing prevalence of EVs are making it difficult for auto insurers to maintain profitability. With the insurance industry experiencing a combined ratio of 105 in 2023, insurers have had to implement double-digit rate increases to manage the rising costs.

The changes impact both insurers and consumers. Insurers are struggling to balance acquisition and retention with rate adequacy, while consumers face rising premiums and are more likely to shop around for better rates.

These trends have been intensifying throughout 2023 and are expected to continue into 2024 and beyond.

Consumers and industry professionals need to be aware of these trends to better navigate the evolving market. For consumers, understanding the factors driving premium increases can help them make more informed decisions about their insurance coverage. For insurers, adapting to these trends is crucial for maintaining profitability and customer satisfaction.

Key Insights:

• Rising Premiums: Auto insurance rates increased by an unprecedented 14% in 2023.

• Risky Driving: Violations, including distracted driving and DUIs, have significantly increased, especially among Gen-Z drivers.

• Electric Vehicles: EVs saw a 54% sales increase in 2023, contributing to higher and more severe claims compared to internal combustion engine vehicles.