Key Insights for the Road Ahead: Top 5 Auto Insurance Trends of 2023

1. Auto Insurers Grapple with Profitability Woes Amid Soaring Claims Costs

Auto insurers implemented record-high rate increases in 2023 to address profitability issues, but it appears that these rate hikes were not sufficient.

2. Auto Insurers Faced with Staggering 112 Loss Ratio, Underwriting Losses Reach 12 Cents on the Dollar

Insurance companies dramatically reduced their marketing and advertising spend in 2022 and continued this trend in 2023, as there was little point in actively attracting consumers who were already shopping for new policies due to rate increases.

3. Insurers Adopt "Sledgehammer Approach" to Rate Revisions, Abandoning Targeted Changes

Some states were considered healthier and closer to profitability, while states like New Jersey, New York, and California were expected to see continued rate and underwriting activity due to poor performance.

4. Auto Insurance Shopping Reaches All-Time High as Consumers React to Rate Hikes

Unlike in a normal market where shopping increases but new policy purchases don't grow at the same rate, consumers in 2023 were more likely to switch policies when shopping for insurance.

5. The New Normal: How Remote Work is Reshaping Commutes and Auto Insurance Risk

The rise in risky driving behavior may be attributed to less congested roadways, which create opportunities for drivers to drive faster and more aggressively than they used to.

6. Frequent Scrutiny of Policyholders' Driving Behavior Key to Managing Risk

Insurers can also re-underwrite policies based on prior loss history and other factors.

7. ADAS: A Double-Edged Sword for Auto Insurers, Reducing Frequency but Increasing Severity

ADAS-equipped vehicles can be more expensive to repair due to costly parts that need replacement, increasing severity.

8. Insurers Struggle to Accurately Price EVs as Loss Results Outpace Expectations

Insurers will need to tune their pricing models and go through a learning curve to properly price EVs due to their fundamental differences from traditional combustion engine vehicles.

9. UM and UIM Coverages: A Growing Opportunity for Insurers as Minimum Limits

Insurers should be prepared for UIM coverages to be accessed more frequently, as not-at-fault carriers will increasingly see limits exhausted with the at-fault party's carrier, and the claim will come back to them to handle the rest.

10.Beyond Claims History: Innovations in Sourcing Prior Loss Data for Enhanced Underwriting

Prior claims history, both at-fault and not-at-fault (where permitted), is highly predictive of future insurance loss, and insurers should explore innovations in sourcing this data from other places to improve their underwriting.

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