Tag Archives: auto insurance

Opportunity Among Latinos in U.S.

The U.S. has grown to become the second-largest Spanish-speaking country in the world, only behind Mexico. The impact the Hispanic population has had — and will continue to have — on this country is quite vast, especially with purchasing power nearing $2 trillion. This serves as an extraordinary opportunity across a variety of markets, insurance being one of them.  

While this demographic shift has created a once-in-a-generation opportunity to serve a historically underserved market, many in the Hispanic community continue to struggle when it comes to getting insurance, which goes for both personal and commercial insurance. Not only is it challenging for this customer to find and evaluate options in Spanish, but the customer is also often forced to brick-and-mortar brokerages, two inconveniences that could easily be solved. 

Conning Research predicts that there will be more 30 million new Hispanic drivers searching for insurance throughout the next 30 years. Why not meet the need?

To do so, it’s important to understand the distinctions in purchasing behavior and preference when comparing the Hispanic market with the broader insurance market. These differences are critical in effectively servicing this market. 

Younger Customer = Opportunity for Longer-Term Value

Because the Latino consumer is younger than the general population, with a median age of 28, this younger customer base translates into a longer average lifetime as they enter their prime earning years. The trend in increasing purchasing power also reflects the increasing needs for personal insurance, from car insurance today to homeowner’s insurance in the future. 

This is also an opportunity to build a customer base that over-indexes on brand loyalty, as more than 50% of Latinos are “likely to find a good source and stick with it,” compared with just over a third of the broader market. A relationship can unlock long-term value and pay dividends over time.

Being Available in Spanish Is Non-Negotiable

Most of the Latino market prefers to speak Spanish, so, if you’re interacting with prospective Latino customers, you should consider providing Spanish language materials or support. You can hire employees who speak Spanish or contractors who can translate your marketing materials. This will open up access to a market that cannot be uniformly served in English. 

Understand What’s Needed and Prioritize Relationship-Building

Most U.S. Hispanic consumers today primarily purchase auto and health insurance. Given the socioeconomic and cultural characteristics of our community, many Latinos focus exclusively on buying the insurance they need.

While many insurance companies want to serve the Latino market, they often ignore the fact that customers are primarily purchasing basic auto insurance and basic health insurance. While maybe not the ideal purchase for insurers right off the bat, these products can serve as an entryway to serving the future insurance needs of the customer, or even providing other valuable and complex products. In many working-class neighborhoods, for example, auto insurance is purchased at the same place where you do your taxes or get loans, so by building a relationship with the Latino consumer you will have the opportunity to earn more of their business in the future. 

See also: 3 Tips for Increasing Customer Engagement

Use the Right Channels

Building a relationship with your Latino customer first requires meeting them where they are. Latinos are extremely tech-savvy and spend more time on their mobile phones than any other demographic. Latinos do research, watch television and purchase all over their phone. Using mobile channels, like social media and text messaging, to reach and service our community will help lower your costs and increase chances of success. 

Putting the proper measures in place to find and attract Latino customers is a no-brainer. It’s not only the right thing to do to provide this underserved demographic with easy-to-access and fair-priced insurance, but it also means increased customer acquisition and revenue numbers for you. To move beyond intention and into implementation, work with your Latino employees to better understand the community, hire employees who know the market and explore partnering with other trusted service providers in the community. 

By taking advantage of this opportunity, insurers will reap the rewards throughout the next decade. And if you don’t meet the market need, someone else certainly will.

Are Pay-Per-Mile Policies Here to Stay?

2020 has been a tumultuous time for consumers and businesses alike. The coronavirus crisis led to nearly half of American employees working from home in the spring of this year. Pair that figure with the fact that unemployment rates climbed to nearly 15% in April 2020, and it’s easy to understand why consumers are looking for ways to reduce their expenses and stretch the dollars they have. And why some insurance companies are making unprecedented moves. 

Numerous auto insurance providers took steps to reduce premiums or issue partial refunds to customers in light of the COVID-19 pandemic, but consumers are still on the hunt for savings. Those one-time deals might not be enough. According to a recent study, online demand for new insurance policies has gone up by 27% since March. 

Without a daily commute for the foreseeable future, consumer interest in pay-per-mile coverage is on the rise 

A recent survey by J.D. Power revealed that more than 40% of consumers were interested in telematics-based auto insurance options. This survey was released in May, early in a pandemic that many hoped would be quickly squashed. With COVID-19 cases once again spiking in some states, the interest could be even higher, because customers only want to pay for as much coverage as they use. 

Despite the appeal, true pay-per-mile policies aren’t offered across the board. At present, only a few carriers offer pay-per-mile insurance and determine premiums according to a mileage fee plus a base rate. Also, the potential savings from a pay-per-mile program may not be quite as high as consumers expect. Drivers who log an average of more than 1,000 miles per month (12,000 miles per year) on the road could end up paying more than they would with a traditional auto insurance policy.  

Increased interest means it may be time for more carriers to consider pay-per-mile insurance as a way to avoid customer turnover while increasing potential revenue.

See also: How to Engage Better on Auto Insurance

The impact of pay-per-mile coverage

While consumers may be interested in the option, some insurers’ hands are tied. Providers cannot offer these types of policies without first getting approval from each individual state’s department of insurance. In addition, privacy concerns and state regulations can make it difficult or costly for insurance companies to implement telematics-based programs in certain states. At present, usage-based car insurance policies are only available to residents in a little over half of the U.S. 

With pay-per-mile insurance, the industry may experience:

Fewer payouts. Drivers who sign up for mileage-based car insurance policies may also be more cognizant of their driving habits, speculates Andrew Hurst, insurance analyst at ValuePenguin. More-aware drivers should create safer roads for everyone — and potentially fewer payouts for insurance providers as a bonus. 

Reduction of fraudulent claims. Usage-based insurance could also lead to a reduction in fraud, according to the National Association of Insurance Commissioners (NAIC). Details that insurance companies collect from telematics devices can make it easier to estimate damages and review the actual facts (i.e., speed, time of incident, hard braking, etc.) when accidents take place. 

More insight into driving behaviors. Telematics tracking could also help an insurer identify individual drivers who should possibly pay higher premiums due to risk. Progressive reveals, for example, that it increases the premiums of around two in 10 drivers who sign up for its Snapshot program due to risky driving habits. However, Hurst said, “I’m not so sure this would be worthwhile in the long run, as customers could simply leave and go to an insurer that didn’t do that.” 

Pay-per-mile coverage and the future

Thanks to a number of factors, traditional auto insurance rates are likely to rise in 2020. Higher repair costs on tech-heavy vehicles, more accidents from distracted drivers and natural disaster-induced claims are partially to blame.  

See also: How to Thrive in Auto Insurance

At the same time, consumer desire for lower premiums and usage-based options is on the rise. So, the insurance industry may need to find other ways to appeal to price-sensitive drivers while still controlling risk and overall costs.

The Evolution of Telematics Programs

Thirteen years after Progressive launched Snapshot, its usage-based insurance (UBI) rewards program, telematics-based policies represent a modest part of personal and commercial lines insurance. Bullish estimates of double-digit adoption by 2020 haven’t materialized, but it’s clear that telematics-based products appeal to a need within the market. Adoption will likely continue to grow. Insurers should consider telematics strategically, whether they expect to enter the space or not.

Adoption: Modest but Real

Insurer telematics activity in recent years has split into rough thirds: About a third of property/casualty insurers are actively engaged, a third are monitoring the space but not yet acting and a third feel telematics don’t apply to them.

Overall, Novarica estimates the penetration of telematics programs at around 6% to 8% of insurers’ overall books, based on industry research and conversations with insurers. These numbers vary substantially from carrier to carrier. At some, telematics-backed policies can be more than 30% of their books, while, at others, it can be as little as 1%. 

Applications: Increasing in Variety

Insurers predominantly use telematics for underwriting and actuarial or product design. This approach aligns with the stereotypical UBI offering, where insurers rate drivers based on telematics data and offer retention discounts to those who prove to be safe risks. More insurers are also providing pay-per-mile offerings (such as Liberty Mutual’s ByMile and Nationwide’s SmartMiles), which charge customers based on the actual amount they drive.

Applications in other insurance functions are less common, but this is changing as both insurers and vendors innovate to offer new types of coverages and programs, like rewards programs to generate regular customer engagement or teen driving programs that can leverage telematics to create speed alerts. These offerings align with broader industry trends toward creating richer digital experiences, particularly in personal lines.

Insurers should also understand that getting the most out of these advanced features requires technological and business support beyond the telematics offering itself. For example, to support a feature like automatic first notice of loss (FNOL), insurers will need quality data, and they’ll need to be able to move it between systems across the enterprise. A comprehensive rewards program may require focused effort from marketing and customer service to stay on-message and deliver a seamless experience.

See also: Driving Into the Future of Telematics

Program Design: Essential for Success

The variety of telematics capabilities and offerings in the market means that insurers should design or expand their telematics programs with care and forethought. As with any technology initiative, the point of telematics-based insurance offerings is to better manage risk, reduce costs or create a superior customer experience.

For telematics, that means that insurers need to consider a number of factors to guide the features of their offerings. These include the target market segment, the channel through which the offering will be distributed, the services offered and how all of these elements align with existing technological capabilities and processes. There’s no one answer, and anything from a basic UBI product to an engaging rewards program could be the right fit, depending on what an insurer wants to accomplish.

Fortunately for insurers that have taken a wait-and-see approach, there are a number of products available in the marketplace, from turnkey telematics solutions to book-of-business analysis from a variety of telematics service providers and data brokers. Although early adopters like Progressive procured and managed their own telematics devices, insurers don’t have to do this anymore. Carriers that are new to the space shouldn’t spend time replicating technology that already exists.

Telematics Beyond 2020

Telematics adoption will likely continue to increase slowly but steadily over the next several years. Depending on the rate of growth, telematics-based policies could make up between $22 billion and $32 billion of the personal lines auto market by 2025.

COVID-19 will be a major factor in that growth. Anecdotally, Novarica has heard from both insurers and vendors that interest in pay-as-you-drive or pay-per-mile policies has increased in 2020 as more Americans are working from home. How long the pandemic lasts and whether widespread remote work becomes normalized could speed adoption for both insurers and policyholders.

Auto manufacturers have also been active in the space, with a number of recently announced partnerships to share driving data from connected vehicles with insurance companies. This, too, could speed telematics expansion by lowering the initial barrier to entry. 

Telematics-based insurance offerings are a small but real portion of the personal and commercial auto markets that will continue to grow. Telematics isn’t going away, but it also won’t dominate the auto insurance industry in the next five to 10 years.

At the same time, telematics doesn’t have to become dominant to affect consumer expectations around price, convenience and service. Insurers should consider potential impact now so that no matter what decision they make, it’s a strategic one.

To learn more about how insurers are using telematics, read Novarica’s full report Telematics in Insurance: Overview and Key Issues.

How to Engage Better on Auto Insurance

Don’t be hesitant to reach out to your policyholders. They want to hear from you — but in the right way. It’s all about creating and implementing the right outreach strategy.

Auto insurance consumers are shopping more than ever before, and that’s not surprising. A competitive environment combined with easy access to online quotes and an informed shopping audience has led to a shopping bonanza, even among loyal policyholders.

Carriers find themselves needing to retain valuable customers but may be nervous that their outreach might not be well-received. Do not fear. Your policyholders want to hear from you, if you use the right outreach strategy.

What’s your outreach strategy?

Does your strategy revolve around the renewal period? Do you simply send policyholders a renewal notice rather than make personal contact? Are you concerned they won’t welcome your outreach outside of renewal?

If you’ve answered yes to any of these questions, you’re not alone. Anecdotally, we know that many carriers are reluctant to reach out to policyholders outside of renewal for fear of putting them off.

However, if you avoid outreach outside of the renewal period, you could be missing an important opportunity to improve customer satisfaction, profitability, retention and upselling/cross selling initiatives. Why? Because believe it or not, your policyholders would like to hear from you more often―and that can affect policyholder loyalty.

See also: 5 Trends Changing Auto Insurance

What consumers are telling us

Our recent auto insurance consumer study, which surveyed over 2,000 U.S. auto insurance consumers who had shopped their insurance in the last year, indicates consumers are not being contacted by their carriers as often as consumers would like―and they’d like that contact to be more personal, not simply a standard renewal notice. After all, who wants to be treated like a number?

Across every age group, 74% or more of our respondents reported they want to personally hear from their carrier during their renewal period. Slightly over half are open to outreach anytime during the policy term. Almost one-third of policyholders would like to be contacted by their carrier both at renewal and during the policy term. Fewer than 14% are content with just a renewal notice.

Here’s the disconnect. Only 46% of respondents reported any personal contact from their carrier during their policy term, including renewal ―even though many are receptive to it, especially during renewal, when the vast majority of policyholders most want to hear from you. In fact, almost half of our respondents who shopped their insurance policy said their carrier’s failure to reach out to them influenced their decision to switch.

Who should reach out to whom?

While our study debunks the common myth that policyholders shy away from carrier contact and reveals that your policyholders do want to hear from you, there are a few caveats. One of them is, “I won’t contact my carrier. My carrier should contact me.” In fact, our research shows that almost half of policyholders are reluctant to contact their current carrier before switching to a new carrier. 18% of those who switched believe it’s the carrier’s responsibility to contact them instead.

But that’s not all. 19% of policyholders who didn’t contact their carrier before switching believed contact wouldn’t have made a difference. In other words, they were sure their carrier wouldn’t respond to their needs. Among those who shop, almost half who switch carriers are influenced to do so because their current carrier never reached out to them.

The message is clear. Connect with your policyholders, because they are waiting to hear from you. By upping your outreach and opening meaningful conversations with your policyholders, you can boost retention and create valuable, long- lasting relationships.

Engage with your policyholders…but on their terms

While it’s great news that policyholders want more engagement with their carriers― engagement that extends well beyond an automatic renewal notice, it’s not a green light for you to inundate them with irrelevant contact or content. Your customers want to engage with you, but they want that engagement to be meaningful and on their terms.

Most policyholders prefer to hear from you through email (90%), but quite a few Baby Boomers would also welcome a phone call (55%). Almost as many millennials are open to contact through a mobile app (43%). If you happen to know when policyholders are actively shopping, it’s good to know that the vast majority of those shoppers are okay with you reaching out within one to five days after they’ve received a competitor’s quote. However, they don’t want to be pestered. One post-quote outreach is enough for most policyholders.  

See also: How to Thrive in Auto Insurance

For carriers that have been reluctant to touch base with policyholders outside of the renewal period (and we suspect there are many), the message is―don’t be. But make sure you understand your target audience’s preferences first, then tailor your outreach to match those preferences.

What do your policyholders want to talk about when you reach out to them? More than you might think.

From increased coverage to bundling options to providing feedback that can help you improve your business, your policyholders are ready and willing to have important conversations with you. These critical conversations can lead to improved customer satisfaction, profitability, retention and successful upselling/cross-selling programs.

Tipping Point for Claims Automation

This year, we have witnessed explosive growth in technology adoption. Zoom video conferencing has risen 574%, Instacart grocery delivery has jumped 450% and Google Classroom usage has increased 580%—all due to COVID-19. The pandemic has truly altered how we think about and use technology. For businesses, it has introduced opportunities for digital transformation. Case in point: the automotive insurance industry.

While some may say insurers are slower to embrace change, the sector has moved at lightning speed to maintain business continuity since the start of COVID-19. The first step was what seemed like an overnight transition to a fully remote workforce. After setting up the required technology to support their employees, carriers then shifted focus to refining the digital solutions that would allow them to better manage the claims process and serve their customers virtually.

Automotive insurers have long relied on staff appraisers and collision repairers to assess vehicle damage after an accident. While virtual estimating—or using photos in place of a physical inspection—is not new, the pandemic has made it the preferred method of inspection.  

Prior to COVID-19, use of virtual estimating was limited and focused almost exclusively on low-severity claims. This was due, in part, to concerns about the ability to produce an accurate estimate. In fact, when compared with other methods of inspection, virtual estimating accounted for just 2% of all estimates written in the United States and Canada just a year ago. 

However, with an increase in our need to socially distance and a decrease in miles driven, the conditions were right for widespread adoption of claims virtualization. In just the first two months of the pandemic, virtual estimating usage jumped to 13%—all while growth in other methods of inspection has decreased or remained stagnant. In addition, some carriers announced early in the outbreak that they were moving almost all of their claims handling to a virtual model, and dozens more reached out to Mitchell to get started. Collision repair shops have also followed suit, providing customers with new tools for collecting and submitting damage photos.

See also: Future of Claims: Automation, Empathy

For insurers, the benefits of virtual estimating include increased efficiency and customer satisfaction. Field appraisers typically complete three to four estimates a day when factoring in administrative tasks and drive time. However, with virtual estimating, that number increases to 15 to 20. By eliminating travel and tasks like appointment setting, employees can focus their efforts on the actual appraisal. Consumers, on the other hand, benefit from the speed, ease and convenience that comes from a digital self-service solution—at a time when technology adoption has never been higher. 

So what impact does this have on claims automation? The first step toward automating the claims workflow was increasing insurers’ comfort level with using photos, instead of a physical inspection, to assess vehicle damage. With COVID-19 accelerating their adoption of virtual or photo-based estimating, we have now reached a tipping point. Insurers have validated the feasibility of using photos in the estimating process. They have seen virtual estimating used successfully for both low- and high-severity claims. And they can no longer dispute the efficiency gains and consumer benefits it provides. These factors combined may make them willing, and ready, to begin automating the complex, labor-intensive claims process. 

The natural next step is to use artificial intelligence (AI) to further streamline and improve estimating. With the photos—and eventually videos—submitted digitally, insurers can rely on an AI engine to identify component-level vehicle damage. From there, the data can be combined with other inputs to return a recommendation of either repair or replace. If repairable, the computer can then populate individual estimate lines with recommended parts and labor costs. Once the data is submitted, carriers can even incorporate automation in the auditing process. Instead of reviewing just a handful of estimates each day, auditors can let the computer review all of the estimates submitted. This will allow them to focus their energy on the claims that need attention. It will also give them the opportunity to rapidly uncover and address any issues.

Leveraging automation in the claims process has many benefits, as noted by McKinsey. First, it improves accuracy. Next, it increases efficiency, reducing expenses by 25% to 30%. Finally, it raises customer satisfaction by as much as 20%.

See also: Keys to ‘Intelligent Automation’

Over the last three months, insurers have taken an incremental step—or leap—closer to claims automation. However, the transition from virtual estimating to touchless claims will not happen overnight. It is an evolution that will require us to re-think how and where we use technology versus how and where humans apply their expertise. In the end, though, automating more of the claims process will allow us to better serve consumers and support the proper, safe repair of their vehicles.