Automakers are putting faster, more powerful engines in even the humblest of vehicles, and insurance losses are rising in tandem. This is the main finding of a new report from the Highway Loss Data Institute examining the effect of vehicle power on the insurance losses of 2003-05 model 4-door cars.
All of this power on U.S. roads has translated into higher insurance losses. The addition of just 1 horsepower per 100 pounds of vehicle weight resulted in estimated 5 percent higher losses under collision coveage per insured vehicle year (a vehicle year is 1 vehicle insured for 1 year, 2 insured for 6 months each, etc.), 1 percent higher property damage liability losses, 5 percent higher personal injury protection losses, and 4 percent higher losses under bodily injury liability coverage for rated drivers ages 25-64.
Losses among 16-24-year-old drivers were even greater, except under property damage liability coverage. Among drivers 65 and older, losses increased for collision and liability coverages. Pricier cars with more horsepower typically showed elevated insurance losses, and men had higher losses than women.
"Many people think high-horsepower cars are risky only for very young people or drivers of sports cars," says Institute president Adrian Lund. "This analysis shows that insurance losses are mounting even for people who are middle-age and drive rather ordinary cars. It's true that horsepower is a bigger problem for young drivers, but it's not just a youthful problem."
Power on the upswing
The performance capabilities of new cars have been increasing for 30 years (see Status Report special issue: speeding, Nov. 22, 2003). Between 1985 and 2005, average horsepower climbed 64 percent to 183 from 111. Cars have gotten heavier, too, but their engines still pack more horsepower per 100 pounds of vehicle weight than earlier models.
The horsepower of Honda's midsize Accord, for example, more than doubled between 1981 and 2005, moving from 75 to 160 horsepower for the base model and 240 for the 6-cylinder version. The 1981 Accord produced 3.3 horsepower per 100 pounds of vehicle weight, compared with 5.2 for the 2005 base Accord and 7.2 per 100 pounds for the 6-cylinder version.
Similar cars, different losses
The effect of vehicle horsepower on insurance losses is apparent in a comparison of a 2005 Nissan Altima and a 2005 Pontiac Grand Am. Both are midsize cars. Their pricetags are similar. But at 3.5 liters, the Altima's engine is bigger than the Grand Am's 2.2 liters. The Altima produces 260 horsepower to the Grand Am's 140. Factoring in the weights of the two cars, the difference between them is 3.5 units of vehicle power. Collision losses for the more powerful Altima are an estimated 20 percent higher than for the less powerful Grand Am for rated drivers ages 25-64. In dollar terms, this means a married man 25 to 64 years old living in a well-populated urban area would chalk up an estimated $339 in collision losses driving an Altima, compared with $283 for a Grand Am. Similar vehicles would have the same estimated collision losses.