COVID-19 Continues to Impact Auto Insurance Market

Dec 17, 2021 / by Meg Lech

As the pandemic rolls on, with the omicron variant providing the latest wrinkle, the auto market continues to be reshaped by COVID-19. Aside from the overall financial impact, now increasing claims, severity of claims and higher losses, and worsening consumer behavior are all leaving a mark. Here is the latest from around the industry:

Auto Products

Auto product saw a rapid and immediate evolution that started in March 2020 and has not slowed down. During the pandemic, people who took mass transit prior to the pandemic were now choosing to drive themselves to avoid large crowds.

People started buying boats, campers, RV's, UTV's and second homes, looking for things to do that were socially distant.

We saw an immediate increase in home food delivery during the pandemic (i.e. DoorDash and Uber Eats), which led to an increase in demand for “Dashers”, for instance, using their personal vehicles for business purposes. And of course, this led to an increase in demand for delivery service insurance.

There is no doubt that the auto insurance product itself has transformed as a result of these trends, and it will continue to do so.

 

Premium

During the pandemic, policyholders were looking for policies that reflected lower miles driven due to stay-at-home orders and simply driving less miles annually. As a result, auto insurers provided an estimated $18 billion in premium relief, a largely voluntarily initiative, except in some jurisdictions where regulators made it mandatory. As we head into 2022, customers may now see higher auto insurance rates as driving patterns return to normal and claims costs continue to climb. So, while it may seem that premium rates are increasing, they are normalizing to pre-pandemic rates. The downside is policyholders may perceive this as a rate increase. Insurers are also facing cost challenges affecting loss costs that include the post-pandemic return to driving, higher repair costs and delays in repair time due to chip shortages, higher parts costs, supply chain disruptions and a labor shortage.

 

Claims Environment

In the Spring of 2020, auto claims had declined sharply with the decrease in drivers on the road. While claims declined, the effort to improve digital technologies enhancing the insurance application and claims handling increased dramatically. Decreased claims during the pandemic had a positive effect on insurers for both auto (less people driving and reduced wear and tear) and related medical claims. The first six months of 2021 were a different story, with the largest six-month increase ever recorded in traffic fatalities. An estimated 20,160 people died in motor vehicle crashes in the first half of 2021, which is an 18.4% increase from 2020 and the largest number of estimated fatalities in that time since 2006.

In October 2021 the National Highway Traffic Safety Administration (NHTSA) noted several alarming safety trends as life returned to normal, including an increase in the number of people speeding and an increase in the number of people not wearing safety belts. There is also a notable increase in the number of male drivers involved in serious accidents in rural areas. Due to the response time for EMS vehicles in these areas, this also has a direct correlation to the severity of the injuries and expected recovery of those accident victims. These findings were similar in a study conducted by Arity (a mobility data analytics company founded by Allstate) released in May 2020, which found a 50% increase in crashes above 70 mph, and a 30% increase in the rate at which people are driving over 100 mph at some time during a trip. While these numbers represent patterns seen during the pandemic, they are not decreasing as hoped, and a continued cause of concern.

 

Technology

A leader on the IBM technology team explained that “insurance companies who have the digital technology in place to do image-based processing, which can help quickly assess damage to a car or house remotely, are doing much better than those who don't.” Drones are being deployed to help quickly inspect disaster areas. New technologies within insurer apps are also allowing insureds to submit their own photos and videos as part of the claims submission. What was once a safety feature during the pandemic is now an accepted time-saving measure.

 

Conclusion

While the financial impact of the pandemic is clear, doubts on the long-term implications continue to pose a challenge across the auto insurance industry. From increased claims, severity of claims, higher losses, and worsening consumer behavior; the pandemic continues to affect auto products, premiums, claims and innovation in technologies. fundamentally changing the auto insurance landscape of the future.

Join this survey panel to share your thoughts on challenges you face and learn from your peers across the industry.

Tags: Data & Technology, Tech News, IoT, P&C Insurers, Commercial Auto, AAIS Insights, Personal Auto, Data/Tech, Insurance Line of Business

Meg Lech

Written by Meg Lech

As Sr. Product Development Specialist for Commercial and Personal Auto – Meg has over 20 years of experience in the insurance industry. With a focus on product development and claims, Meg has worked in product development specialist and claims specialist roles for large carrier operations. As AAIS’s Auto Sr. Product Development Specialist, she is responsible for the rollout, development and maintenance of forms, manual rules and rating information for personal and commercial auto products.

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