In a Tumultuous Year for Auto Insurance, Customers Seek Better Value

Latest customer survey findings on auto insurance trends during the last year show largely similar after-effects in most world regions. In the US, a JD Power 2021 Insurance Shopping Study revealed that the pandemic caused a 55% decrease in number of miles driven, inducing auto insurance customers to shop around for more personalized and cheaper policies. The Car Insurance Price Index in association with Willis Towers Watson revealed that comprehensive car insurance premiums in UK fell by 14% since the first quarter of 2020, the biggest annual drop since 2014.

LexisNexis Risk Solutions, which aggregates annual market data about driving behaviors, auto insurance shopping, underwriting and claims to help insurance carriers better understand shifting landscapes, in its 2021 U.S. Auto Insurance Trends Report, noted that auto insurance shopping data trends stayed turbulent throughout 2020. In certain African economies, insurance premiums were reported to have dropped to six-year lows as vehicles sat idle with drivers staying at home following Covid-19 movement restrictions.

The pandemic resulted in mid-term and renewal auto insurance shopping going for a rollercoaster ride. As various states began to issue shutdown orders, shopping declined initially and later rebounded when stimulus checks reached bank accounts of customers. As cities began to gradually reopen, shopping continued to take an upward trend, but dropped again during periods of civil and social unrest during summer and severe weather events. For those whose finances were adversely affected by the pandemic, a 6% rise in shopping activity was reported.

A notable insight from the J.D. Power survey was that while auto insurance customers shopped around more fervently than ever before, incumbents lead with higher gains. While insurtechs like Metromile and Root grew on the back of their data-driven policy pricing, incumbents wrested an even bigger market share. The past year alone witnessed a 3% year-over-year increase in auto insurance customer migration to the five biggest insurers, as incumbents dealt with customers’ pandemic distress as well as insurtechs did. The marketplace was found to be increasingly differentiated more so by price, underscoring the need for carriers to bring innovative customer solutions.

Liberty Mutual, for instance, offered blanket premium refunds and reductions to customers who drove less during the pandemic, where insurtechs like Metromile publicized their pay-per-mile offerings for discounted pricing. State Farm’s usage-based insurance offering, Drive Safe & Save, let customers earn discounts up to 50%, just as Metromile customers saved 47% on average via telematics capabilities.

On the claims side, empty roadways engendered dangerous driving with a significant increase in speeding first observed in mid-March 2020 that stayed 10% higher than 2019 figures for the rest of 2020. Driving under the influence (DUI) violations rose among younger drivers, with a near 50% increase in recorded violations in March-April. Collision claims reduced, but severity rose to a 3.7% year-over-year increase in 2020.

The pandemic saw insurance companies quickly adapting and implementing virtual car insurance claims, setting the path to contactless claims handling. Auto insurance claims dropped by nearly a quarter since the pandemic. With fewer claims, carriers were able to refine their customer experience. The results are still coming in, but the feedback has been positive. Customers who said they “definitely will” renew with their current insurer were higher: 76% during the pandemic versus 72% before.

While digital claims are becoming more mainstream, results show a large number of customers still seek quality customer service without adopting digital tools or want to supplement digital tools with personal interaction. Customers who did not use digital claims tools also experienced a similar level of customer satisfaction. When it comes to claims handling expectations, there seems to be a healthy appetite for both digital tools with artificial intelligence and good old fashioned guidance from real persons. Auto insurance customers want flexible options on how they communicate with their insurers.

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