Today's auto insurers are navigating unprecedented challenges. As part of the AAIS Webinar Series, AAIS hosted a virtual presentation on November 16, 2023, moderated by Vice President of Products, John Kadous, and featured Product Manager of Commercial and Personal Auto, Auto Naik. The two discussed current market conditions like premium pricing, compliance, regulation, and technology, and how these challenges are pushing carriers to their limits. They also explored the growing need for adaptable solutions and tools that will empower insurers to confidently navigate the industry's shifting terrain, including a demonstration of an AAIS solution called Mindmaps which is equipping carriers to drive ahead in these uncertain times.

Car Safety Innovations, Their Effectiveness, and Impact on Losses

Naik relayed that in recent years, cars have had a lot more electronic hardware, software, and technical innovations that are not only making the vehicles operate better but are safer and much more pleasurable to drive. According to him, the most interesting innovation is the replacement of LiDARs with RADARs. “This is making cars [drive] a lot smoother because the techniques and the computers within the cars are able to track moving as well as stationary objects better,” Naik explained. “So instead of slamming the brakes like you would have seen earlier models with automatic braking or safety features, cars project where the collision can happen and give a better, smoother experience.”

This is also simultaneously making cars safer. “In the U.S., the number of drivers on the roads and the miles that we travel is increasing and in spite of that, debts per million vehicles are at a historic low,” Naik shared. “Except for the blip with the COVID pandemic, we can generally say that cars are becoming better at making sure that we are safe.” However, not all innovations are working as well as others. “If you look at the numbers over a period of time, we find that AEB (automatic emergency braking) definitely works,” said Naik. “But lane departure, blind spot detection, rearview cameras… all of these are making a difference, just not as much as the automatic emergency braking.”

While these technologies may be reducing accidents, losses are not going down. “Claims are going down, but the severity is increasing,” Naik confirmed. “Both property damage as well as bodily injuries are trending upward.” He believes this is probably due to the fact that one in five cars does not have these features, which causes costs to go up. “The way vehicles are designed does not help either,” he said. “Expensive cars are expensive to fix.”

Auto Insurance Market Trends & Challenges

Naik believes the auto insurance industry is definitely on notice. “Every single state operates like a separate market,” he stated. “It's not just the size or the regulation. It is also the participation of carriers in each of these markets.” Carriers are unevenly distributed with varying levels of competition. “We realized a range of carriers between 27 (Washington D.C.) and 86 (Indiana) across the U.S., which is a pretty large range of carriers operating.”

The large markets of California, Texas, Florida, and New York are dealing with their own challenges. “California, for example, is struggling with regulatory approvals because there is more competition [of carriers],” Naik shared. “Florida struggles for a whole different set of reasons. The order of maintaining programming seems to be much higher, which keeps a lot of the smaller carriers out.” Then there is New York, which Naik thinks could use a lot more competition as it's becoming a very lucrative market.

When it comes to combined ratios, S&P Global revised them upward for 2023 and is not projecting them to drop below 100 until 2027. “So, the loss ratios are expected to be high,” Naik verified. While carriers raising their rates seems to be the simple and easy answer to this, he knows it is very difficult to go through. “It’s not a blanket solution. We probably have to think about how best to approach and sell the market that we want to go in and be a little more targeted,” Naik suggested.

AAIS Solutions

AAIS offers well-crafted forms, robust ratings, and ready-to-use digital content so that carriers can build and deploy a program very quickly. The AAIS Auto Program has both Personal Auto and Commercial Auto. Within the Personal Auto program, there is a standard program and a non-standard. For Commercial Auto, there is the Business Auto Motor Carriers and Auto Dealer program. “AAIS’s biggest value to the industry is ensuring Members and the wider industry can quickly adopt and run a program that will keep them up-to-date and in compliance with where they need to be in their markets,” said Naik. “Just in this year alone, [AAIS] has tracked 64 legislative bills or regulations.”

AAIS’s Personal Auto program is structured so that Members can operate in their market and customize it for themselves. One of the more popular solutions being used across the organization is Mindmaps. “We take approved products and turn them into an implementation-friendly format,” Naik explained. “So, when you get the Mindmaps from AAIS, Members can be sure that a majority of the heavy lifting is done.”

To view the Mindmaps demonstration and the rest of the presentation, click on the video above.

Questions? Reach out to any of the featured speakers with the contact information below.

John Kadous

Vice President of Products (AAIS)

johnk@aaisonline.com

Ash Naik

Product Manager, Commercial & Personal Auto (AAIS)

ashn@aaisonline.com