We recently attended the Auto Insurance Report National Conference [AIR] hosted by Risk Information. The conference’s underlying theme was that advances in data collection will provide benefits to consumers and challenges for insurers. Sources of data will come from many new directions ranging from government agencies at the state, county and local levels to data collected from cars via telematics. This additional insight will be essential for carriers as they work to figure out how to stay on top of emerging demographic trends, including the growing role women in the purchasing decision. Ultimately, all of this information presents an opportunity for insurers to gain a better understanding of customer needs and to better serve their clients.
Here are our three key takeaways from the conference:
#1 The Big 7: The auto insurance market has been flat for the past few years, but the top 7 carriers continue to soak up market share and grow – primarily due to aggressive pricing and high ad spend. This leaves many major firms with declining revenues vulnerable over the long-term. Only a few firms outside of the top 7 have posted growth through premium customer service and retention programs. Carriers who make the smartest use of the new data mentioned above will refine their understanding of customer needs and find growth opportunities through new tailored coverage options for targeted segments.
#2 Telematics: Despite pending patent cases, firms have moved forward aggressively with their telematics initiatives. A number of major auto insurers have introduced programs over the past year. It’s important to note that telematics is just an ends to a means. The real dynamic is Usage-Based Insurance (UBI) – where carriers use a driver’s behavior to more accurately price the policy. Insurers can no longer procrastinate developing a UBI solution. Consumer demand will rise alongside the industry’s adoption of UBI and more importantly, the corresponding advertising budgets that tout smarter, cheaper policies.
#3 Google’s Self-Driving Cars: Google showcased a remarkable test case where a legally blind person is able to commute using this “smart” technology. Google’s Self-Driving Cars are forecasted to be publicly available in 5 years at a price point under $100K [currently $150K]. Benefits include higher safety ratings in testing and video-recorded driving (and accidents). Still, the implications for insurers are multi-faceted and present new challenges for underwriting and service.
We anticipate that winning carriers will execute a comprehensive digital strategy that simplifies the customer experience and provides smarter insurance coverage. New data sources will provide unprecedented documentation of driving behavior and consumer profiles – serving as a disruptive force for underwriting, claims and marketing. As this narrative unfolds over the next 10 years or so, carriers who need to catch up have ample time to reassess how effectively they service clients and take corrective action to improve.