It’s no secret that the auto insurance industry has faced serious profitability concerns over the past few years, especially through 2022. As more drivers return to the roads in 2021, disturbing trends begin to emerge. First, the severity of damages poses a major challenge; Six consecutive quarters of growth of at least 5% have been recorded during the first six months of 2023. LexisNexis® Insurance Claim Meter. Second, car availability took a big hit after the pandemic, with the annual run rate of newly created vehicles falling from 18 million in March 2021 to 13 million just six months later. Since then, insurers have continued to grapple with supply and demand issues for parts; a tightening labor market; greater demand and higher severity costs from year to year; Cars are becoming more complex by the day due to advanced driver assistance systems and the growing popularity of electric vehicles (EVs).

How Do We Adapt?

This context, which highlights many challenges, can help us understand that we live in an insurance market unlike ever before. We talk a lot about “challenge” status quo” At LexisNexis Risk Solutions, we are within our own four walls and taking this challenge to the market. There was a time in the industry when it wasn’t nearly as difficult to predict spikes in insurance policy shopping and switching activity; because many insurers across the country traditionally achieved rate qualification at similar times when certain leverages were drawn. But as insurers grapple with the approval of new rates in various states that affect all of the above-mentioned rate qualifications, consumers are in some cases experiencing sticker shock when they see new premium notices, which can lead to auto insurance shopping.

Shopping Opens a Window of Opportunity for Insurers Ready to Adapt

With 2024 well underway and now heading into 2025, insurers have the opportunity to capture market share; This is especially evident in the direct insurer channel, where factors such as marketing spend and rate adjustments are causing increased shopping behavior. For example, Texas, one of the first states to raise rates and experience positive growth, saw negative shopping numbers in the final quarter of 2023. This may highlight the need for insurers to adapt their strategies to capitalize on increased earnings and balance purchasing rates with competitiveness. shop before it stabilizes. We believe there is a window of opportunity, but it may be temporary. Insurers may only have a limited time frame to take advantage of current insurance industry conditions and secure their position in the market.

In addition, with sustainable shopping growth expected to continue through most of 2024, savvy insurers will also be keeping a close eye on their existing business portfolios, especially given some of the significant driving behavior changes we have seen in recent years. Changes in driving behavior such as those we have seen over the last few years cause risks to shift over time, and this is exacerbated by increasing rate pressure in our current market; This means that someone they thought was less risky is now riskier and riskier. An insurance company got screwed because they didn’t take this into account in their expected payments for the year. This is an important moment when insurers must look in the mirror and do everything possible to ensure risk-appropriate pricing and underwriting discipline. If renewal isn’t top of mind in your insurance organization, now is the time to make it a priority.

There is no doubt. The auto insurance market is still at an inflection point as trends continue to buck the norm and consumers are shopping for higher rates. Yet, while this unusual environment presents insurers with unforeseen challenges, it also presents some unique opportunities for carriers willing to confront the issues head-on by taking advantage of market uncertainties today to grow their business accounts for the future.