June 9, 2022
The Hardening Personal Auto Insurance Market will Require Product Innovation to Solve
What: In 2022, personal auto insurers find themselves in a bit of a tough spot as issues that started during the pandemic, such as mileage volatility and market contraction, are combining with inflation and supply chain issues to really drive up operating costs. Market hardening is expected.
Why it matters: Auto is the difficult line to solve, and many carriers are locking themselves into losses because of these challenges. Compounding the issue is the regulatory and policyholder experience issues likely to result from rate increases for the line. Many carriers will need to find product innovation opportunities to solve these problems through improved segmentation.
Read: Between a rock and a hard market: Solutions for personal auto | Visualize | Verisk
Auto Insurance Scores at Risk, Insurers Need to Prepare Alternatives
What: In the early 90s, the Fair Isaac Corporation (FICO) introduced auto insurance scores to help carriers better price their products for the given risk profile of the policyholder. Now these auto insurance scores, which cannot be viewed in some cases, are widely used as a factor in personal auto underwriting.
Why it matters: As the quality of auto insurance score results deteriorate we expect regulators to scrutinize carriers for their rating rules. If auto insurance scores are taken away, carriers will need to find alternate data sources for rating. Based on the broad use of auto insurance scores, this will impact most carriers.
Read: What motorists need to know about their auto insurance score
Getting Reinsurance is the Latest Challenge for the Troubled Florida Insurance Market
What: Reinsurance prices for Florida have risen by an estimated 20%, putting many carriers at risk of losing their financial stability rankings, which could lead to insolvency or rehabilitation.
Why it matters: What we are seeing in Florida could be a prelude for the rest of the country, and insurers should be preparing for dramatic inflationary and reinsurance pressures in personal lines across the country. Carriers who can’t move quickly to adapt will be locking themselves into years of losses.
Read: Universal Completes $696M Reinsurance Program; Five Others in Florida May Not
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