Twenty Trends

Brian Sullivan and Patrick Sullivan, Auto Insurance Report

1. Covid Impacts Will Linger

• More working from home = less miles driven

• Supply chain issues will continue for some time

• Historical data will be less valuable in predicting this new future

• Insurers who can see changes quickly (esp. telematics) have advantage in a changing environment where past ≠ future

• Insurers are definitely going to face “Long Covid”

B

2. Too Much Money = Consolidation

• Is 2020-2021 consolidation a trend or an event?

• You can argue, that it is an event, driven by too much money

• The companies sold have been available. They sold now for a reason

• The Hartford proved you can stop acquisitions (at least so far)

• Going forward, there is still too much money, so there will likely be a few more deals

• Good news — there are startups too!

B

3. Virtual Claim Settlement Works

• Photo estimating (and soon Lidar) works. Case closed

• It even works with bigger hits

• And customers love being more involved in claims

• Adjusters still participate, but only in real value-added situations

• What we see now is just the tip if the iceberg

• Integration of tools into core systems is essential; not easy

P

4. User Experience is Everything

• Ready or not, we are in a digital first environment

• Consumers expect a refined user experience across the board, from claims, to underwriting, to sales. (Thanks Steve)

• Insurers need to catch up to the broader economy and push beyond the level of digital parity they have reached with each other

• Website, Mobile, chat bots, AI; they’re all apart of this world

• Lemonade brings a better UX Experience, and it paid off

P

5.Remote Work SucceededBecause of Prior Relationships

• Everyone went home with no notice and the industry thrived

• It wasn’t because of technology, or anything that had been set up in advance. In fact, we weren’t prepared at all

• Success was driven almost entirely by the relationships people had from sitting next to one another for years

• This success provides no indicator for future results. As staffs evolve with virtual hiring and no personal interaction, we’ll enter a brand new world we know nothing about

B

6. Insurers Have AdvantageIn Attracting Talent

• Few industries can match insurer work from home opportunities

• As many employees reject the return office/commuting, the nature of insurance process will be very helpful

• Not yet proven: innovation and collaboration over Zoom, etc.

• Some people will need to work together. Not every day, but often

• Many older workers taking the opportunity to retire

B

7. Live Meetings Must Include Networking

• It makes no sense to bring people together, lock them in a dark room, and talk to them all day

• If leadership, adjusters, agents, staff are going to come together, there has to be lots of time for unstructured talk

• No 10 minute coffee breaks! No lunch speakers!

• Training, “announcements,” procedural discussions, all fit nicely online. Reserve live meetings for live interactions

• Team building requires the team to be togetherB

8. CATs, Not Just for the Home

• Hurricane Ida and ongoing fires highlight auto insurer CAT exposure

• Severe weather not just limited to property insurance

• Salvage skills are key in dealing with cars that are flooded, burned out, battered by wind, thrown around by tornados, etc . . .

• Smart insurers push weather alerts to customers

• Keep your car out of harm’s way, don’t drive through standing water . . .

P

9. Commercial Auto Still Stinks(For Some)

• The pandemic was great for commercial insurers, but you can’t rely on a global pandemic for profitability

• The long-term underlying profit problems remain

• Commercial insurers must redouble efforts to improve underwriting and pricing

• Now is the time to embrace innovations such as fleet telematics

• It can be done: there is a huge spread between winners and losers

P

10. The Credit Fairness Wars

• Social justice focus of 2020 and economic pressures from Covid forced revisiting the issue

• The discussion remains the same, are insurance scores fair?

• This time with, with the added dimension of telematics

• “We are blind” not longer an answer

• More in April 2022

B

11. Alternatives to Insurance Scores Not Necessarily More “Fair”

• As we learned yesterday, if you eliminate credit, the rating weight has to go somewhere, and consumer groups will be surprised

• Married/homeowners etc. not necessarily “fair”

• California’s focus on driving record in clearly biased

• Credit is FCRA. These other factors are not!

B

12. Is Telematics More Fair?

• Poor people live further away from work, and drive more miles

• Poor people are less likely to have work from home opportunities

• Poor people are more likely to work at night and in cities

• Poor people are more likely to live, and therefore drive more miles, in higher risk areas

• Can you change where you live, where and when you work?

• Telematics is very fair. You can change how you drive. But telematics is not perfectly fair

P

13. UBI: Grinding Toward Dominance

• Ok, so we’ve been promising UBI for more than a decade . . .

• . . . but this time we’re more refined. It isn’t coming quickly, but what you saw from GM and CMT, the connected car is here

• There will be holdouts on all fronts: consumers will reject, regulators will block (CA!), automakers won’t share, insurers will resist, agents won’t sell

• But driving behavior is just too good to ignore

• Especially when you combine with credit!P

14. ADAS Tipping PointStill Too Far Away to See

• Tricia Morrow showed us the wonders of modern technology

• IIHS is measuring clear successes

• Long before self-driving cars, ADAS will reduce claims

• But gains so far have not moved the dial

• It will be at least 5 years, probably 10, before we see it

• (We’ve been saying 5-10 years for . . . 5-10 years!)

• So your claims history is still relevant to ratemakingB

15. ADAS-Driven SeverityRequires More Insurer Effort

• Insurers need to be more involved with design/repair

• Andrew Rose can’t be the only person in the room

• This won’t be easy — as Tricia explained, repairability is far down the list for engineers

• IIHS has been profoundly effective in auto safety

• Someone has to play that role for improved repairability

B

16. The Next Trend: Electrification!

• Every automaker has pledged to drop ICE for EV

• Electric vehicles should not change frequency, but severity issues are not yet clear

• High Tesla costs today are not indicative of future

• GM, Ford, Toyota, even BMW, Mercedes & Porsche, will be better at supply chain management

• Look for a major focus of AIRNC22 next April, and our joint event with IIHS in May

P

17. Speeding is Here For a While

• Mileage rising and starting to look “normal,” though distributed

• Reasonable to assume that empty-road speeding would decrease

• But speeding wasn’t just empty roads, it was also less enforcement

• As roads fill with cars, speeding is sticking (remember Ryan)

• This is anecdote not data, but enforcement hasn’t returned

• We could have the worst of all worlds, with more traffic driving up frequency, with sustained speeding driving up severity

P

18. Better Integration is Essential

• There are a number of hubs around which the industry moves, such as Duck Creek (thanks Mike), CCC (thanks Jason) and more

• These tools are great on their own, but for the industry to make full use of the possibilities it is essential to integrate with others

• No one says it will be easy, or without competitive pressure

• The signs are very positive, and insurers should push hard to make it happen. Don’t take no for an answer!

P

19. 13 Companies in 130 Seconds!

• State Farm: a bigger vision than auto, and it is working

• Geico: Glory days are over. Time to start anew

• Progressive: Killing it.

• Allstate: Solid, smart, but just can’t grow

• USAA: coming out the other end of a rough patch in auto & home

• Farmers: profit at expense of marketshare. Can’t last forever

• Liberty Mutual: Sneaky successB

19. 13 Companies in 130 Seconds!

• Nationwide: Another profit over market share. Also can’t last

• American Family: They go their own way, and it works

• Travelers: Having a great 2021! Another sneaky success

• Kemper: Still connecting disparate parts, could end well

• Socal Auto Club (actually all three): solid, but waiting for innovation

• Erie: old-fashioned values can still play!

• Phew . . . B

20. Lessons From the Plague

• Forget the old days of waiting for trends to develop

• You need to see changes in claims and sales in real time, and then respond instantly

• If the pandemic ended abruptly, this might not be so big a deal

• But the changes from the pandemic will linger. Some will stick (more work from home), some will fade (economic slowdown), but nothing will be clear for at least 12 months

• Don’t let down your guard. Remain flexible and decisive!B

See You Next Year! April 24-26, 2022 The Waldorf Astoria Monarch Beach Resort

Dana Point, California