Distracted Driving and Auto Insurance

When it comes to their commuting habits, drivers are learning a hard lesson. A nationwide trend shows that auto insurers are charging higher premiums for distracted driving caused by cell phone use.

The increases are the result of more accidents and a rise in claims costs, and the trend can be attributed to one major factor: distracted driving. What’s the bottom line? Smartphones and tablets are raising your insurance rates and wreaking havoc on the roads.

“We’re seeing it play out all across the nation,” says Louisiana Insurance Commissioner, Jim Donelon. “It’s universally attributed to a combination of distracted driving, cell phone use while driving.”

Donelon claims that auto insurance premiums remained essentially flat over a five-year period, with annual increases of around 1% until about five years ago, when everything changed. According to Donelon, the cost of auto insurance in Louisiana has been rising at an alarming rate. He claims that premiums paid by drivers increased by an average of 8% in 2016. While he believes it is too early to predict how much interest rates will rise in 2017, he believes the trend will soon level off.

State Farm is Louisiana’s largest insurer, with more than 1.1 million policyholders. As of Jan. 30, the company raised rates by an average of 13.5 percent, up from an average of 8 percent the previous year. Other businesses were impacted as Progressive Security raised rates by more than 4% in early 2016, then by more than 9% later that year. Allstate followed suit, raising rates by an average of more than 9% in 2016. Other insurers argue that those increases do not fully reflect the reality of the problem, and some providers claim that a 19 percent increase is fully justified in filings with the state Insurance Department in Louisiana.

The number of miles driven in the United States increased by more than 3% in 2015, the largest increase in that figure in more than 20 years. The number of accidents increased by nearly 4%, according to the National Highway Traffic Safety Administration, and the total number of accidents increased by nearly 18% between 2011 and 2015.

As a result, auto insurers in Louisiana saw claims costs rise from more than 67 percent of the $2.0 billion total in premiums paid in 2011 to nearly 77 percent of the $2.3 billion collected in 2015.

While innovations such as cameras in each car mirror, touchscreen displays, front collision warning systems, and multi-airbag systems have improved driver and passenger safety, the impact of distracted driving now accounts for 10% of traffic fatalities. Distracted driving accounts for nearly 20% of fatal crashes in Louisiana.

Distracted driving is blamed on “smartphone activities” such as watching videos, reading, texting, talking, and adjusting various in-car and phone-based sound systems, according to experts. According to experts, smartphone use is overwhelming the best of the latest accident-prevention technologies found in many cars and trucks.

“I’d say over half of the wrecks we see people (claiming on their insurance) – they won’t admit to it – are from distracted driving. And distraction is usually their phone,” said one insurer.

Donelon, for one, believes there is some light at the end of the tunnel and that there are reasons to believe the current wave of large increases will end soon.

During one insurer’s conference call on the subject, stock analysts and investors recently learned that “the spike is over and rates have stabilized at a new norm.”

Another intriguing aspect of the distracted driving problem is that even though teens say they don’t like texting and driving, they do it themselves.

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