Businesses and consumers alike have had their fair share of difficulties with the ongoing pandemic. 2022 marks a hopeful new perspective for all, including the insurance industry.
Auto insurance’s challenges run deep: In the past two years, carriers have had to adjust to the rise of price comparison websites, monitor consumers’ changing driving habits (and assess whether the changes are temporary or permanent), and deal with an ever growing number of fast-moving startups that wish to change the auto insurance game.
But there’s definitely still life in the old firms. Traditional insurers are looking to 2022 with greater resilience and more targeted offerings to meet consumer demands, which have evolved vastly over the last two years.
Here are the five trends that I predict will unfold in the coming year and beyond.
Several U.S. states have already banned discriminatory metrics like credit scores or using gender to score risk and set auto insurance rates. However, this isn’t the norm across the board. In fact, data collected in California, Illinois, Missouri and Texas found, on average, 67% of companies charged at least 10% more in ZIP codes where more people of color live.
In 2022, we will likely see regulators get serious about restricting the use of measures like these that disproportionately affect lower incomes and minorities. I predict we’ll see a stronger push toward fair pricing for all, regardless of economic status or demographics.
Most auto insurers also sell home policies and vice-versa. As a way to minimize churn in 2022, we will see more bundling discounts and a greater focus by both agents and carriers to encourage people to buy both from the same firm. One thing for consumers to be wary of is a deal that may sound too good to be true. These policies could end up gradually costing insureds more after the first “honeymoon” year.
More people working from home than ever before and thus commuting less. This has been a boon for many auto insurers as loss ratios are way down compared to pre-COVID times. While some insurance providers have started giving customers discounts and reducing rates, others have been more circumspect.
Ruling closer with the consumer stance, I expect regulators in 2022 to give a hard time to those who failed to give back to their customers for driving less. In 2021, we saw leaders in some states including California and Michigan demand auto insurers immediately issue refunds to drivers. But that wasn’t the case nationally as the wider market continued to see profit as a result of short-changing consumers.
Every year, it seems there’s a new announcement about an automaker selling insurance. Remember Toyota and Insurify? If not, don’t worry. Most of these initiatives tend to be forgotten after a few months.
As technology continues to push insurance evolution, it follows that consumers will be able to buy insurance directly from the dashboard of their vehicle sooner than later. I believe we will see the groundwork being laid for technology-driven insurance in the new year, but don’t expect every firm to become a Tesla with its telematics model just yet.
There are ever greater numbers of sensors on cars, and the rise of assistive technology means the amount of data available is increasing rapidly. Telematics has already been introduced to the industry. However, the more data that becomes available, the more insurers can know about how their customers drive.
I anticipate insurance providers will increasingly leverage telematics technology to better understand who their customers are and how they are driving to more accurately price policies.
Recent developments in telematics, fair pricing, product bundling and more will prove to be instrumental in moving the industry forward.
Robert Smithson ([email protected]) is the founder and CEO of Just Insure (Just), a pay-per-mile insurance company. These opinions are his own.
