Sport Utility Vehicles And Auto Insurance Costs

1998 Ford Expedition

Session MIS-33

Sport Utility Vehicles• Jeep Grand Cherokee• Ford Explorer• Lincoln Navigator• Ford Expedition• Toyota Land Cruiser• Mercedes-Benz ML320• Dodge Durango• New 2000 Ford Excursion

2000Ford Excursion

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• Exempt from gas guzzler tax• Bumper mismatch with cars• Pose greater risk of loss to cars• Higher rollover potential

Factors Affecting Auto Insurance CostsSize, 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 frames

– 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

Growth of SUVs

929,000

1,750,000

2,700,000

1990 1995 1999

Sport Utility Vehicle SalesU.S. Market

Growth of Light Trucks

1992 1998

36%50%

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

Light TrucksPercent Of All New U.S. Car Sales

Factors Affecting Auto Insurance Costs

– Heavy-duty• GMC and Chevy Suburban• New 2000 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

– 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

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

– Are smaller cars safe enough?– Does Detroit need to change?

The Most Capable SUV Ever?

Was this SUV on the way to the North Pole or to the top of a mountain? This is what really happened in the Blizzard of 1999 to one of those go anywhere SUVs.

What’s The Problem With SUVs?• Rating issues

– 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.– 18% of new vehicle sales are SUVs.

What’s The Problem With SUVs?• Rating issues

– Does data support different rating?• Physical Damage (Comp vs. Coll)

– Expect higher Theft, lower Coll losses• 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?• Rating issues

– 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. Urban– Youthful vs. Adult vs. Senior Adult– By Region, By State

Panelists:• Kim Hazelbaker

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

– HLDI publishes insurance data concerned with the human and economic losses associated with owning and operating motor vehicles

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

Panelists:• Michael Dubin

– Consulting Actuary in Casualty Practice of the Atlanta office of Milliman & Robertson

– FCAS, MAAA, Associate of the Conference of Consulting Actuaries, and member of the International Actuarial Association

– Holds B.S. in mathematics from Carnegie Mellon

Sport Utility Vehicles And Auto Insurance Costs

1998 Ford Expedition