While the number of miles driven in 2021 didn’t quite rebound to 2019 levels, it was pretty close. LexisNexis anticipates 2022 to be another more “normal” year in terms of mileage. Along with the growth in the number of miles driven are the number of connected vehicles on the road. These more advanced autos can give insurers more accurate and complete mileage information. This allows for more precise rates.
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For the second consecutive year, auto insurance shopping and new policy growth numbers showed volatility. This is due in part to lingering effects of the pandemic. One of the biggest influences on shopping growth was the global microchip shortage, which resulted in fewer new cars and, in turn, fewer vehicle purchases. LexisNexis Risk Solutions reported car purchases account for as many as 1 in 3 auto insurance shopping events.
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Usage-based insurance policies are gaining more interest among consumers, who are considering if traditional insurance models still fit their needs. LexisNexis reported that 67% of consumers are aware that driving and vehicle data can be used for insurance discounts and 71% are interested in using that data to unlock those savings. However, a disconnection persists as just 22% of policyholders have used data to receive a discounted insurance premium.
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During the second half of 2021, property and collision claims severity began to moderate before shooting up in the summer. By August 2021, property damage claims severity was up 14% compared to the same period the year prior, while collision claims severity was up 23% year-on-year. Further, total loss claims mirrored the upward trend seen in collision severity. LexisNexis reported that as of October 2021, 23% of claims resulted in a total loss. Since 2016, collision claims that were total losses have increased 35%.
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Moving into 2022, six states had carried over significant bills or proposals that either ban or restrict data that can be used in risk-based insurance and underwriting. LexisNexis reported that Colorado passed the broadest insurance regulatory legislation in 2021. The bill, among other things, prohibits the use of “any external consumer data and information source, algorithm, or predictive model (external data source) with regard to any insurance practice that unfairly discriminates against an individual based on an individual’s race, color, national or ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression.” LexisNexis noted in its report that “this could be harmful to consumers as 85% of new U.S. consumer auto insurance policies issued to consumers in 2021 benefited from products that leverage data and analytics.”
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As 2022 continues to unfold, auto insurers could be facing another year of vehicle and insurance shopping volatility as well as increasing claims severity. This is according to LexisNexis Risk Solutions, which reported the auto insurance industry is in a critical phase.
“While we have seen some traditional patterns re-emerge with respect to miles driven and insurance shopping volumes, we saw another rollercoaster year due to volatile activity in claims severity, insurance switching, more serious traffic violations and vehicle purchasing due to macroeconomic conditions,” Adam Pichon vice president and general manager of auto and home insurance at LexisNexis Risk Solutions, said in a release. “Add to that increasing consumer interest in telematics data and an active regulatory and legislative environment, and we are seeing more signs of a revolution in the industry than a rebound.”
He added accurate and comprehensive data will allow insurers to price and rate more precisely, resulting in claims being handled more efficiently and a better customer experience.
“When you consider all the variables at play, I do think the assertion by LexisNexis Risk Solutions that we are in a revolution of sorts in the insurance industry is apt,” Karlyn Carnahan, head of insurance, North America, at Celent, said in a release. “Like no time I can ever recall, insurers are reliant on data and analytics to not only assess risk, but also to provide a more seamless experience for the customer from point of quote all the way through the claims process. Across the insurance continuum, data is oil that keeps the engine running.”
The above slideshow reveals trends and market movements LexisNexis Risk Solutions has highlighted as more signals of a pending revolution for the auto insurance sector.
