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April 7, 2022

Market Insights

Auto Insurance Losses are Skyrocketing

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What: The pandemic-related dip in driving activity is now largely in the rearview mirror, but increasing accident rates and loss severity are driving down results for auto insurers. To compensate, insurers are raising prices, but regulatory constraints are likely to challenge just how far insurers can pull that lever. 

Why it matters: People are driving more, which increases the frequency of accidents. Social inflation and repair costs are also on the rise driving up the severity of auto-related losses. The combination of these issues spells major problems for insurers in a highly regulated environment. 

Read: U.S. personal auto insurance underwriting results dove in 2021

Industry Challenge

The Evolution of Risk Rating in Customer Acquisition

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What: With advancements in telematics and a deepening understanding of traffic patterns, there’s a new race among auto insurers to acquire the most cost-effective drivers. With 69% of customers willing to share their data for discounts and the rise of embedded coverage, the cost of acquisition is already rising and insurers need to jump in or risk being stuck with the riskiest drivers. 

Why it matters: Given the problems in auto, any path to more refined segmentation is a win for consumers and carriers alike. More nuance is always better than a broad brush when it comes to fixing profitability problems.

Read: Using risk rating in insurance customer acquisition

Industry Challenge

Allstate Assures Investors on a Return to Profitability

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What: In the face of rising costs for repairs and increasing severity of accidents, Allstate is pulling out all the stops in its goal of returning to profitability. Raising rates is a core part of its plan, but Allstate hopes to mitigate the effect on its customers by using predictive models and telematics to accelerate the claims process, thereby reducing costs. 

Why it matters: Here is another example of a carrier looking for nuanced profit improvements, as claims acceleration and automation may have a positive impact on profitability. We expect to see carriers race to additional mechanisms to solve profitability problems. 

Read: Rate Hikes, Telematics, Data Science Leading Allstate Back to Profit

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