How will Memorial Day 2020 claims differ from previous years?
Sheltering in place and less travel could affect the number of claims insurers receive from the summer kickoff weekend.
It’s pretty safe to say that Memorial Day 2020 will be different from previous years. Numerous states in the U.S. will still be under shelter-at-home orders or be in the process of gradually re-opening. Historically, Memorial Day was the kick-off to summer, filled with parades, graduation parties, family gatherings, trips to open the cabin and set up the boat deck, and more.
According to AAA and IHS Markit, the 2019 Memorial Day holiday travel volume reached its highest level since 2005. AAA defines Memorial Day travel as trips that include travel of 50 miles or more away from home during the five-day period from Thursday to Monday.
The majority of travelers did so by auto as in previous years, with 88-89% consistently choosing to drive to their holiday destinations over the last decade. Historically, travel volumes have been influenced by the price of gas, consumer optimism, employment, income growth and travel deals. Year-over-year fluctuation in the number of travelers has historically reflected the economy’s impact on leisure travel.
This year, travel will also reflect consumer’s perceived risks from COVID-19. A similar yet much less severe situation occurred in 2009. By early May 2009, the number of people infected with the H1N1 virus in the U.S. had begun ramping up. As of May 6, 2009, the CDC reported nearly 1,500 confirmed and probable cases of the H1N1 virus, yet Memorial Day travel still increased slightly, as declining gas prices and numerous travel deals convinced people to hit the road. With numerous states re-opening now, we will certainly see some Memorial Day travel, where analysis of historic Memorial Day weekend claims activity may help us know what to expect this year.
Analysis of non-comprehensive auto claims data collected on behalf of CCC’s customers reveals Memorial Day weekend losses have accounted for approximately 30% of non-comprehensive losses for the full month of May. Historically, most of the auto collision and liability claims with dates of loss falling over the Memorial Day weekend occurred on Friday, with Thursday losses closely following. (See Table 1)
First notice of loss
Because the Memorial Day weekend falls at the end of the month (and in some years at the very end of the month) many of the losses that occur during that time are not reported and processed until the following month, with vehicle repairs potentially being scheduled throughout the early summer.
What is interesting is what the differences in the mix of claims for Memorial Day weekend losses are versus the mix of claims for the month of May less the Memorial Day weekend losses. While not surprising or dramatic, the differences do highlight how closely aligned traffic patterns are to vehicles in accidents and the damage incurred.
For example, comparing the average for the last five years, more of the non-comprehensive Memorial Day weekend vehicle losses were both non-driveable and total loss. Additionally, the mix of vehicles from the Memorial Day weekend losses are also younger and include more light trucks — not surprising given the vehicle chosen for a road trip is likely larger and newer with more room and reliability. Not surprisingly, the average repair cost for Memorial Day weekend losses averaged higher across the five years as well. (See Table 2)
With Memorial Day 2020 likely to see fewer travelers overall, there is a chance that an even larger than usual share will be traveling by auto. Traffic volumes have started to tick back up again — particularly in states that have been at the forefront of re-opening. Through early May, states like Texas, Florida, and Arizona are seeing daily traffic volume trending between -20% and -30%, while states such as Michigan, Illinois, and Connecticut are down -30% to -40%. As more states reopen, miles driven and traffic volumes will grow, but both will remain in negative territory for the remainder of the year.
By the numbers
With fewer overall travelers, congestion will be less, and travel speeds higher. So, while historically losses from Memorial Day weekend have characteristically resulted in more expensive claims than losses from the full month of May, that difference may be even more pronounced in 2020.
Finally, don’t count on Mother Nature to behave over the holiday. Comparison of all Memorial Day weekend claims (Thursday-Monday) by calendar year by loss category shows the large increase in comprehensive losses in CY 2014 and CY 2019. (See Table 3)
Significant storm activity worked its way across the U.S. May 24-26, 2014, with a substantial number of vehicles damaged by hail ranging in size from 1 inch to 4.25 inches. And in CY 2019, the southeast corner of Colorado was hammered with huge spiky hail over the holiday. Comparison of all Memorial Day weekend claims nationally by primary impact point reveals just how significant these hail storms were, with many of the losses reported with hail or non-collision losses.
CY 2020 has already seen its share of storm activity, with a significant share of vehicle losses from hail or water damage, particularly in states such as Iowa, Nebraska, Oklahoma, Missouri, Illinois, Louisiana, Ohio, Texas, Kansas, and Michigan — each of which saw more than 10% of their overall appraisal count for April 2020 stemming from hail losses. Nationally, over 6% of all losses in April 2020 came from hail, the third-largest record after the 7.9% in April 2011 and 6.7% in April 2016.
The good news is early data from AccuWeather predicts May 2020 will be different than last year, with 250-325 tornadoes predicted for the month versus a total of 506 in May 2019. These days we can all use a little good news!
Susanna Gotsch (sgotsch@cccis.com) is a director and industry analyst with CCC Information Services Inc.
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