How much does auto insurance claims cost?

There are a number of variables that go into determining how much auto insurance claims cost. While at face value, it may appear that auto insurance companies are bearing the cost of auto insurance claims, the real shift in responsibility is toward the buyer of auto insurance policies in the form of higher premiums and administrative costs.

Primary attention is merited to the following factors:

• 1. Medical expenses. Insurance companies pay tens of billions of dollars in medical claims every year. With average medical costs (from hospitalization to medical tests) ranging in the tens of thousands of dollars, it is no surprise medical costs account for the biggest proportion of the pie, especially in factoring the cost of auto insurance claims.
• 2. The cost of repairs. Accidents don't just injure people, they damage property as well and liability claims from driver-owners and third parties tune up to billions more in auto insurance claims costs. The cost of repairing vehicles, replacing damaged parts, labor, and body work -- all combine together to account for a substantial percentage of overall insurance claims costs.
• 3. Litigation costs. Unfortunately, matters don't end at the site of the accident. Many spillover to courtroom battles, aggravating costs even further. Court fees, attorney fees, administrative expenses, and other aspects of litigation are expensive propositions accounting for billions more.
• 4. Administrative costs. In addition to direct costs associated with accidents, there are additional expenses incurred in the form of administrative fees for appraisals, filings, paperwork, and other general administrative expenses.
• 5. Indirect costs. You may not expect these, but lost work days, loss of employment, rehabilitation, and other indirect costs are also factored into determining how much auto insurance claims cost. These indirect costs, though not easily predictable, play a significant role in driving up the overall cost of coverage and thus affecting the premium insures will have to pay.
• 6. Other parties. Very often accidents don't involve just two parties. Fellow-passengers, family members, friends, car poolers, and other third parties are equally important drivers of the overall cost of auto insurance claims

The end result is that average claim costs are increased exponentially, with each addition of a third party. Imagine how much it would cost for all the aforementioned expenses for each party involved in the accident.

More likely than not, life and property would be damaged on both sides and the cost of insuring and reimbursing these damages cause an exponential shift in the overall burden. While consumers may harbor the fallacy that it is the insurance company who pays for these expenses, the truth is that you, "the insured," is truly paying for these expenses in the form of increased premiums and higher insurance rates. It is for this very reason that we have described some key factors that go into determining how much insurance claims cost.

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