Auto Insurance Challenges & Opportunities in 2024

Every challenge is also an opportunity. In 2024, auto insurers will face numerous challenges. If they can adapt, they will survive and even thrive in the years ahead.

Underwriting Profitability Is Elusive

In 2023, Fitch Ratings said the U.S. commercial auto insurance line had posted a combined ratio above 100% in 11 of the last 12 years. 2023 was expected to be another year of underwriting losses due to rising claims severity. The U.S. auto personal lines sector has also been underperforming – according to Fitch Ratings, the first half of 2023 saw significant underwriting losses. Although the sector is expected to improve gradually, catastrophe losses and inflation could threaten its recovery.

The Challenge: Underwriting losses are a major challenge for auto insurers right now. In some states, the situation has become so bad that property insurers are pulling out of the market. For example, Kiplinger says four Kemper Corp. subsidiaries are no longer renewing preferred home and auto policies in California.

The Opportunity: As insurance companies flee challenging markets, those that remain can increase their market share. However, they’ll still need to find ways to improve their profitability. Although some factors are out of their control, they may be able to improve their bottom line with more precise underwriting and efficient claims handling.

Policyholders Are Shopping Around for Better Prices

“Auto insurance customers are starting to shop for insurance like they shop for gas.” That’s according to Stephen Crewdson, senior director of insurance business intelligence at J.D. Power. The 2023 U.S. Insurance Shopping Study found that auto insurance shopping has been increasing, mostly due to consumers looking for better prices.

The Challenge: Insurers that lose customers to increased shopping could see their profits deteriorate further. In fact, Accenture says insurers could lose up to $170 billion over the next five years due to policyholder churn caused by poor claims experiences.

The Opportunity: One insurer’s loss is another’s gain. When dissatisfied policyholders leave one insurance company, others have an opportunity to take that business. Insurers that keep prices down by controlling claims costs stand to gain a sizeable market share.

Technology Is Developing Rapidly

Does it seem like technology is advancing faster than ever? You’re not imagining it. Recent advancements in artificial intelligence and related technologies have changed what’s possible in a short amount of time. Insurance companies are taking advantage by investing heavily in technology. Case in point: in June 2023, Property Casualty 360 reported that nearly 60% of insurance companies were already leveraging generative AI.

The Challenge: Technology is moving so fast that insurers may struggle to keep up. By the time they implement a new technology, it may already be outdated. Falling behind is becoming a serious risk. Plus, the gap between laggards and leaders will continue to grow as technology advances.

The Opportunity: McKinsey & Company says automation can reduce the cost of claims by up to 30%. Insurers that succeed in their technology strategies may see major gains. To do so, they’ll need an implementation strategy that allows rapid speed to market and integration with other tools.

Customer Service Expectations Are Increasing

Customers are demanding more from companies as technology leads to greater possibilities. According to Salesforce, 73% of customers expect better personalization when technology advances and 74% expect it when they provide more data. Customers also want streamlined experience – 79% say they expect consistent interactions across departments. Furthermore, 74% of customers are worried about the unethical use of AI and 68% say advances in AI make it more important for companies to be trustworthy.

This applies to all customer-facing industries, but it’s particularly relevant to insurance. Insurers are collecting more data and leveraging AI, and policyholders expect to reap the benefits.

The Challenge: In the past, policyholders might not have heard from their insurers outside of renewals and claims, but this no longer cuts it. Modern consumers expect more. If insurers can’t meet rising customer service expectations, they risk losing customers.

The Opportunity: Providing a better customer experience means investing in technology that puts the customer first. Many insurers appear to be answering the call. The Gartner CIO and Technology Executive Survey found that insurers prioritized improving the customer experience in 2023, placing this goal above growing revenue or developing new products and services.

Will You Seize the Opportunity in 2024?

To seize the opportunities 2024 will bring, auto insurers, TPAs, and self-insured fleets need the right technology partners. VCA’s claims management system improves the customer experience by supporting communication and shortening claims cycles while reducing claims costs. Learn more.

Download this IA Case Study to learn more about how VCA can help your business.