The New York Times reported as of April 2nd, “… [there are] 297 million people in at least 38 states, 48 counties and 14 cities and two territories are being urged to stay at home.”(i) The state of California was the first to issue this decision, with the order effective March 19th.
Overall miles driven are already seeing a dramatic drop. Daily traffic volume trends nationally had begun declining by single-digits in mid-March 2020 according to the company MS2, but rapidly fell to 30 and then 40 percent by the end of the month.
With new ‘shelter at home’ guidance from the Federal Government extending through April 30th, miles driven can be expected to fall significantly in the next several months. Health experts expect the return to ‘normal’ will vary across the country, and smaller outbreaks in coming months may return some areas back to ‘shelter at home’. Assuming significant declines in mileage driven, especially in those states with statewide ‘shelter at home’ orders, overall miles driven in the U.S. could be down as much as 10.1 percent for the full year. By comparison, miles driven saw its biggest year-over-year drop of 3.9 percent during the Great Recession in August of 2008.
A comparison conducted by the Washington State Patrol of the number of traffic crashes in Washington during the third week of March 2020 versus the same week in 2019 showed a 67 percent drop in crashes statewide, as people stayed at home and businesses closed. Among those crashes, minor accidents fell 60 percent; serious accidents fell 78 percent, and fatal accidents fell 100 percent. Daily traffic volumes at the same time in WA fell between 15 and 20 percent during the same week. The difference, while supported only by one week’s data, underscores how accident frequency is not just a by-product of higher traffic volume alone. It’s how congested those roads are – i.e. the number of vehicles on the same road at the same time. According to research from the Insurance Information Institute, PCIAA and CAS, collision frequency in the United States is strongly and positively related to various measures of congestion. Among the variables that best predict collision frequency are: Drivers per Lane Mile (Licensed drivers/lane miles total), Urban Average Commute Time, Rural Average Commute Time, System, and Urban VMT.(ii)
What’s also interesting is that where traffic has eased, traffic speeds are up. Analysis by INRIX comparing average traffic speeds along Interstate 110 in Los Angeles on Wednesday, March 18 versus other ‘normal’ Wednesdays in the two prior months revealed traffic at rush hour was actually moving 71 percent faster than usual.(iii) Travel at higher speeds historically has been viewed as higher risk, yet less populated roads, and less congestion also means drivers less likely to be distracted.
As unemployment numbers grow, and businesses struggle to remain open, many economists worry the U.S. may slip into recession. A record 6.6 million individuals in the U.S. filed for unemployment benefits the week ending March 28th, ten times the previous record high, and some economists are projecting the unemployment rate could reach as high as the 20 percent seen last during the Great Depression.(iv) In an effort to stem the damage to the U.S. Economy Congress passed a $2 trillion relief package. A slowing economy points to slower demand for all goods, which will also hit miles driven by freight. Freight transportation Intelligences projects total U.S. freight ton-miles will fall about 5 percent in Q1 2020 compared to same quarter in 2019, followed by a nearly 12 percent drop in Q2 2020, a 4 percent drop in Q3 2020, turning positive to 1 percent-plus by Q1 2021.(v)
Analysis of CCC Industry data reveals some significant impact to auto claims volumes already – particularly in those areas with statewide shelter at home orders.
Finally, analysts are projecting U.S. auto sales will see a significant drop in March and April, potentially falling further than the decline during the Great Recession. Among the first automakers reporting results, March 2020 sales are down by 40 percent or more, and first quarter 2020 sales are down 10 to 30 percent. For the full year, analysts’ projections range from a low of 11.2M to 13.5M, levels last seen during the Great Recession.vi Fewer auto sales will slow the gradual decline in the average age of vehicles on the road. And, as we saw during the Great Recession, people may hold onto vehicles longer, leading to higher total loss percentages in the coming quarters.
Unfortunately, while many of the shelter at home orders may finally ease at the close of April, economic consequences of the COVID-19 outbreak will remain in place for quite some time.