The auto insurance market is facing a variety of near-term and long-term pressures that could eat into profits.
Conversely, new data technologies and innovations are providing the data to combat these threats, helping insurers maximize their potential for a healthy bottom line.
In the near term, the industry remains on solid ground. According to Deloitte, in the P&C sector, U.S. premiums written grew 4.6 percent in 2017, the highest percentage in the past decade, before jumping by 12.7 percent in the first half of 2018.
However, longer-term outlooks are less clear, mostly because of all the talk of autonomous vehicles. Autonomous vehicle technology, a rise in on-demand transportation and a shifting of liability to manufacturers will shrink the auto insurance sector by more than 70 percent, or $137 billion, by 2050, according to research by KPMG.
Several technologies and innovations are reshaping the way auto insurers conduct business. For example, artificial intelligence, machine learning, Internet of Things, big data analytics, automation, chatbots and telematics are all impacting insurers and their business models. More specifically, a handful of these technologies are having a direct impact on how claims are processed for customers and their vehicles.
Case in point: The last two years have seen deadly hurricanes hit various locations in the U.S., and these storms provided damage to property, homes and vehicles well into the billions of dollars.
When insurance companies need to calculate payouts, the most critical aspect of the entire process is having access to the most timely and accurate valuation on each vehicle in the portfolio. However, not all valuation services are created equal, and leveraging the wrong value, multiplied over several thousand vehicles with payouts, can be financially devastating to an insurer.
Today’s advanced valuations include data analytics to provide more precise valuations. These VIN-specific data resources take into account each individual vehicle’s unique history footprint, helping insurance professionals determine the impact a vehicle’s history has on its value, both current and future. Even with the use of vehicle history reports, insurance professionals are still reliant on automotive values based on an unscientific, subjective, educated guess as to the impact a vehicle’s history has on its value, which often leads to mistakes and inconsistencies in the valuation and payout process during claims processing.