Has Auto Insurance Changed Forever
While the pandemic has taught the world to expect the unexpected, things are expected to change very quickly for auto insurance in 2021.
The trends that emerged in insurance industry under the unique circumstances of a global pandemic has evolved a completely changed scenario for auto. Commercial auto insurance, which is a $160 billion market saw fewer auto claims in 2020, with a 19% decrease in the number of collision claims. Collision severity saw a 3.7% year-over-year increase in 2020.
And more than one-third of auto insurance customers said they are willing to try usage-based insurance (UBI), which uses telematics technology to monitor driving patterns and rewards safe driving and fewer miles driven. Currently, 16% of customers say they are already using the technology, which is double the volume from five 5 years ago.
With lesser miles driven the world-over, and customers’ expectations transformed, auto insurance is staring at a makeover, to adapt and deliver more intuitive products.
01 Altered driving behavior
Both auto insurance shopping and miles driven have seen rollercoaster like ups and downs. Shifts in how people work, travel and live can have long term impacts on their driving behavior, which affects auto insurance-related factors, like credit scores, premiums & claims. Some notable changes in driving behavior despite reduced miles driven were an uptick in risky behaviors such as high-speed driving, hard braking, and DUI violations. Distracted driving too has become a greater concern over time, as more drivers, especially Gen Z are using mobile devices on the road. Changes in driving behavior have accelerated an interest in telematics and usage-based insurance (UBI) programs that can be applied as early as the point of quote.
02 Demand for Telematics-based models
Now, consumers are increasingly willing to share their driving data in return for better insurance policy pricing, and they want that data available instantly, rather than having to wait for a monitoring period. As consumer credit information continues to be a valuable resource for underwriting insurance risk, telematics-based scoring models provide an excellent complementary data set for providing a more informative picture of risk, boosting underwriting efficiency. A rating plan that includes more accurate and timely driving behavior insights from telematics data is making insurance and pricing more personalized.
03 Personalization is the new normal in insurance
Personalized services that meet customers’ immediate needs are a must-have for auto insurers in 2021. Auto insurance is changing towards a new, contextual, data-driven customer experience model with a focus on personalized services. This includes gaining real-time insights into customer usage patterns, policy purchasing trends, presenting insurers with a unique opportunity to expand their business models into affiliated networks, and data-led revenue generation — a trend that has already taken over industries, like ecommerce, content streaming etc.
04 Claims cost will change
Claim costs for car damages have continued to rise, by a whopping 57% in the past decade according to a recent study. Claims professionals are looking for smart ways to save on costs in 2021 and beyond. The solution for reducing claim costs is claims management closer to the digital streams which ensure that the data flowing into claims ecosystems is accurate and standardized.
05 Huge uptake of AI technologies
In order to process all of the data being collected and to make their processes more efficient, AI and machine learning have taken huge strides in the customer experience and price categories for auto insurers. With AI applied in more contexts, such as collision detection and analysis– a better understanding of customer expectations is available. Insurers will be able to generate smart insights and transform their offerings to meet the changed expectation of a younger demography.
The experience of the past year has probably taught that it’s best to set expectations low and adaptability high. However, the auto insurance industry is throwing a different story. After living up to a challenging financial climate — a new paradigm of agile, telematics data-backed, and AI-powered auto insurance products are expected to see fruition in 2021.