Smartphones & Distracted Driving: What’s the Impact on Auto Insurers?

Auto insurers have been caught off-guard. Traffic deaths had been in decline for four decades, as a result of Mothers Against Drunk Driving (MADD), seat belts, crumple zones, anti-lock braking systems, air bags and a string of other safety improvements. Then in the middle of 2015 things changed. Road deaths jumped 7% in 2015, and rose another 6% in 2016.1

This has resulted in an unanticipated spike in payouts for US auto insurers. The reason, according to Matt Winter, President of Allstate,2 is that the proliferation of smartphones proved an irresistible distraction just as cheap gas prices and a pickup in the US economy resulted in more drivers on the road.

71% of young drivers admit to sending a text while driving.3 That means that they're not looking where they're going for five seconds on average. Among teenage drivers, 20% admit to taking pictures, surfing the internet and checking social media while driving.4 It’s not just the entertainment device in your pocket that is a problem. Typing your destination into the car navigation system or searching for your favorite songs are also dangerous.

Greater frequency and severity of accidents aren't the only headaches for auto insurers. The cost of car repairs is also rising, partly due to the new safety features that were supposed to prevent those accidents. The cost of replacing a bumper after a fender bender may have doubled or tripled because of the rear-view camera and sensors that are now typically built into bumpers.5