CHESTERFIELD, Mo. — F&I products and reinsurance provider Protective Asset Protection released a new set of data analysis showing how much average claims have increased annually for guaranteed asset protection payouts and vehicle service contract claims dating back to 2014.
Between 2014 and 2018, the average new-vehicle GAP claim payout grew 19.5%, or 4.7% per year. For used vehicles, in the same timeframe, GAP payouts increased by 18.5% per year, producing a four-year total increase of 95%.
Analysts blamed several factors, including an increase in claims due to more collisions with more cars on the road. Also cited were insurance companies becoming more likely to total vehicles due to rising replacement parts complexity and corresponding costs. Falling residual values — particularly for cars, less so for trucks and SUVs — and more impactful weather events were blamed as well.
Average VSC claims have risen 21% between 2014 and 2018 for new vehicles, and a 3.7% increase for used vehicles. New vehicles have averaged a 5% increase each year during that time, with a smaller 0.9% increase for used vehicles.
“Service contract claims had among their largest payout increases in 2018 for both new and used vehicles, which illustrates that the costs associated with repairs and parts replacements continues to rise due to the complexity of today’s vehicles,” said Christopher Bernish, Protective’s senior vice president of operations and IT. “GAP claims are impacted by many of the same factors but also tend to be influenced by weather patterns, which is understandable, given recent devastating hurricanes and other weather events.”
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