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7 January, 2021 0
auto insurance covid 19

How Has COVID-19 Affected the Auto Insurance Industry?

COVID-19 has had a profound impact on society and businesses. The impact on the auto insurance industry was discussed in detail at a 2020 American Academy of Actuaries Annual Meeting. Pulling information from the Insurance Information Institute (Triple-I) research, the meeting highlighted the following important points.

Insurance Claim Spikes During the Pandemic

Triple-I estimates that in 2020 insurance agency pay-outs to customers for claims will be $14 billion. In the second quarter alone, insurers returned about 15 percent of premiums, amounting to enormous losses compared with the previous year.  A portion of this increase can be directly traced to a surge in COVID-19 related claims.

Due to the pandemic and shutdowns, people are driving much less than in previous years. This has been reflected in a 30 percent decrease in the frequency of property damage claims. However, the severity of claims being processed has increased by nearly 20 percent. This increase may be attributed to faster driving speeds. Evidence is growing that driving speeds have increased during the pandemic, even in rush hour traffic. Traffic control analysts estimate driving miles are 12 percent lower this year while traffic deaths are up 4 percent. If this pattern continues, it will certainly lead to more dangerous wrecks and drive insurance rates higher.

How Telematics Improve Insurance Service

The rise of telematics technology has made it possible for insurance companies to evaluate a policyholder’s driving behavior in real-time. IoT devices in the car report real-time data back to the insurer about the driver’s speeds, handling around curves, and other performance metrics tracked while driving. Thanks to telematics, insurers have been able to return money to customers faster than in the past.

Today, telematics is at the foundation of usage-based auto insurance which adjusts rates based on individual information such as mileage and driving behavior. A 2020 study by Arity showed that 58 percent of drivers approve of insurance companies monitoring driving behavior as a basis for setting premiums, which was a big jump from the previous year’s study in which only 39 percent were on board with insurance monitoring. This technology rewards safe driving practices and allows drivers to control their auto insurance costs and pay lower premiums.

Customer Satisfaction on the Rise

According to a study by J.D. Power, customer satisfaction has hit record levels during the pandemic. From November 2019 through September 2020, information was gathered from over 11,000 auto insurance customers who settled claims during the six months leading up to the study. The results showed that on a 1,000-point scale, customer satisfaction rose to a record high of 872, which was four points higher than the previous year. The 2020 increase marks the third consecutive year of rising customer satisfaction in the auto insurance industry.

Almost all claims processing metrics are up including claim servicing, estimation, repair, rental, and settlement. One of the key improvements was the overall cycle time for processing claims, which increased from 12.6 to 10.3 days. While overall positive, an area that stood out as a decline was the first notice of loss.

One of the biggest indicators of success in the auto insurance industry is the retention of clients. According to Power, claimants who indicated they “definitely will” renew with their current insurance provider increased from 72 to 76 percent. This increase may be related to insurers making sure agents are always available and fulfilling promises which was another area that saw measurable improvement.

Insurance companies’ use of direct repair programs (DRPs) with repair shops led to increased customer satisfaction. Insurer-affiliated shops scored 888 versus independent repair shops which scored 844. The top-rated auto insurance companies scored slightly higher than 900.

A Positive Future

The impact of COVID-19 on auto insurance has been mixed, but signs are positive that the industry is building loyal support during this difficult time. Listening to customers and analyzing customer feedback has allowed the industry to strengthen its bonds with policyholders. For more information and insight into the impact of COVID-19 on auto insurance policies, contact the experts at Fuller Insurance in Southern California today!

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