Dan Risley, a project manager for Allstate at the company’s Illinois home office, said this new “Transactional Non-DRP” system will enable any shop to upload estimates and digital images to Allstate, receive insurer-written estimates from Allstate, etc.
“We realize not all customers use a network shop, and we want to make it easier to do business for those shops and for our customers,” Risley said.
Risley’s discussion of the forthcoming change was just one of recent news items related to insurance companies that will likely be of interest to shops. Here’s a wrap-up of some of this news.
Insureds are shopping. Consumers shopped and switched auto insurers more aggressively in 2010 than they have for 14 years, according to preliminary survey findings from McKinsey & Co.
The survey analysis authors told Auto Insurance Report that the percentage of consumers who got a quote from another insurer was up 23 percent last year, and the percentage of those who actually changed to another insurer was up 56 percent. Only 48 percent of consumers have been with the same insurer for six or more years, down from 53 percent in 2008.
The economy is certainly prompting some of this trend. Many people are looking to shave household costs, and may be willing to switch for far less in savings than it may have taken them to bother just a few years ago.
But another reason for the shopping may be that auto insurance advertising soared 22.6 percent to a record-high $5 billion last year, according to analysis by Dowling and Partners Securities. That reversed a 4.2 percent decline in advertising in 2009.
Prior to 2009, the industry had increased advertising spending for seven straight years. In the past decade, insurance industry advertising —the vast majority of which focuses on auto insurance—has grown 211 percent from $1.6 billion in 2001. The biggest jump in advertising last year was by Farmers Insurance, which spent $505 million, up 125 percent from the previous year.
Insureds are confused. Although motorists may be shopping for insurance, they don’t necessarily know what they are buying. More than one-third of U.S. drivers who have read at least part of their auto insurance policies have had trouble making sense of them, according to an online Harris Interactive poll commissioned by InsuranceQuotes.com.
About 87 percent of the 2,079 insured drivers surveyed said they had read at least some portion of their policies, but 36 percent of those drivers said those policies were somewhat or very difficult to understand.
Insurance rates outpace labor rates. Increases in auto shop rates are not quite keeping up with overall inflation—but pricing for auto insurance is rising faster.
The national average for body and paint labor rates has risen only modestly year-over-year since 2006, according to figures from CCC Information Services. The average body labor rate rose from $41.42 in 2006 to $44.67 in 2010, up an average of 2.1 percent per year (paint labor rates rose similarly). The national average hourly rate for paint materials rose slightly faster, from $22.26 in 2006 to $25.37 in 2010, an average increase of 3.5 percent per year.
Overall, according to the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) for autobody work rose an average of 3.44 percent per year for that 5-year period.
By comparison, the CPI for all products rose an average of 2.2 percent per year. The CPI for auto insurance rose an average of 2.6 percent per year, and the CPI for vehicle parts and equipment (other than tires) rose an average of 3.92 percent per year.
But data for the first four months of 2011 tells a different story. The overall CPI seems to be rising faster than that for autobody work, and the CPI for auto insurance is staying even above that.
State lawmakers consider insurance-related bills. As legislative sessions wrap-up for the year in many states, bills regulating insurers in ways that impact shops continue to be passed, considered or rejected.
A bill approved by the Nevada Assembly to establish a program to help low-income drivers get low-cost auto insurance coverage died in that state’s legislature in late May because it failed to come up for a vote in the Senate within 110 days of introduction.
North Carolina Insurance Commissioner Wayne Goodwin is urging motorists to oppose three bills in that state that would strip his office of its ability to cap auto insurance rates. “We hear the insurance companies calling it auto rate modernization,” Goodwin said. “Well, if making your rates skyrocket is modern, then you can just call me old-fashioned.”
Wisconsin Gov. Scott Walker has signed a law cutting the minimum property damage coverage that drivers in that state must carry from $15,000 to $10,000.
And in appointing insurance company executive Kevin Clinton as the new insurance commissioner of Michigan this spring, Gov. Rick Snyder made clear his priorities for Clinton. Snyder, a Republican, said Clinton must “make sure consumers are protected by making sure financial institutions are sound,” and will “lead our effort to eliminate burdensome regulations that are preventing the (financial) industry from growing.”
More federal oversight coming. The U.S. Department of the Treasury in May announced plans to create a Federal Advisory Committee on Insurance to provide guidance to the new Federal Insurance Office created as part of federal Wall Street reforms. Half of the committee’s members will be reserved for state and tribal insurance regulators; other members will be chosen from the various insurance industries, the agent and broker community, public advocates and academia.
Allstate looks to change a downward trend. Allstate’s acquisition of Esurance (and Answer Financial, an insurance quote service) from White Mountains Insurance Group is widely viewed as a good move for the insurer, which has seen its marketshare drop the past two years. The buy should help Allstate, as the country’s second-largest auto insurer, better compete with No. 3 GEICO and No. 4 Progressive which, like Esurance, sell directly online and which have been gaining marketshare ground as Allstate has faltered. GEICO’s 5 percent growth in total premiums last year puts it on track to catch Allstate (if Allstate’s rate of decline in recent years continued) by 2013.
Esurance, founded in 2005, sells policies in 30 states and has seen its total premiums grow on average by 20 percent a year for the past five years.
Anti-texting effort continues. With Indiana recently becoming the 32nd state to approve insurer-supported bans on texting-while-driving (Pennsylvania lawmakers are considering a similar ban), State Farm offers a free widget for the Android phone that it hopes will help drivers avoid the urge to read or send a text while behind the wheel.
The “On the Move” widget allows users to compose and reload customized messages—such as, “I can’t respond right now because I’m driving”—that are sent as automatic responses to incoming text messages.
Collision repairers needn’t be overly considered with such efforts, however. Research by the Highway Loss Data Institute showed last year that accident rates aren’t reduced by laws prohibiting drivers from texting or from using hand-held cell phones.