Here are three trends the auto insurance industry can expect this year.
- Drivers can expect to see their premiums increase, as new vehicles require more advanced technology and are more expensive to insure.
- More and more insurers and drivers will rely on telematics, a technology that monitors vehicle locations and driving habits in real time.
- Insurers will leverage technology to better understand their customers’ conduct and rate policies with greater accuracy.
More and more people are driving as pandemic restrictions have eased. However, many drivers have changed their driving behavior and have not returned to their pre-pandemic level of driving. More and more drivers and insurers are also adopting technology that tracks vehicle locations and driving parameters. Changing driver habits and the technology that monitors those habits will play a big role in the auto insurance industry. Here are three auto insurance industry predictions for 2022.
Premiums on the rise
Auto insurance premiums are increasing for several reasons. Inflation hit a 40-year high, rising 8.5% for the 12 months ending in March. Additionally, the average used car sold for more than $28,000 in January, a 42% increase from before the pandemic. Used car prices have skyrocketed due to strong demand and a global shortage of semiconductor chips. These are also known as microchips, and new vehicles require around 40% more microchips than cars made before the pandemic.
Generally, cars with more advanced technology cost more to repair. This makes them more expensive to insure due to higher repair costs, including replacing parts – especially for foreign cars – or replacing a vehicle in the event of a total loss.
Real-time driving scores
One of the greatest innovations of recent years has been the use of telematics. Telematics is a technology that monitors vehicles in real time using GPS. It also monitors driving habits such as speed, sharp turns and braking. Tesla provides drivers with near real-time safe driving scores. Telematics technology is increasingly used by major insurers including Nationwide, State Farm, Allstate, Progressive and Geico.
According to Kelly Hernandez, Associate Vice President of Personal Lines Telematics at Nationwide, more consumers are taking advantage of “usage-based capabilities and saving money by having more price control over their insurance protection.” .
Since the release of their SmartRide Instant program, select Nationwide customers can receive an instant discount on their premiums based on their driving history. The program also includes a distracted driving feedback experience to help reduce distractions such as cell phone use. Hernandez says “This will hopefully prevent accidents…making the roads safer.”
More customizable insurance
With the rapid adoption of telematics by insurers and drivers, insurers can offer coverage specifically based on driver habits and miles driven. Unlike a “one-size-fits-all” policy, drivers will now be able to customize their auto insurance coverage to suit their unique needs.
In 2019, Nationwide launched its SmartMiles program, a pay-per-mile solution where the award is based on the number of miles traveled. Monthly rates are flexible and vary depending on this number of miles. The program was launched to focus on low-mileage drivers – those using public transport, the elderly, students, those working close to home and those with extra vehicles. Many drivers have permanently changed their driving behavior due to the pandemic, especially those working from home and using their vehicles less.
With vehicles becoming more expensive and telematics able to monitor a driver’s driving habits, car insurance companies will offer more targeted policies to meet consumer demand. Usage-based insurance programs and personalized pricing will soon become the norm. With car insurers having access to billions of miles of driving data through telematics, they will be able to better understand how their customers drive and price their policies more accurately.
Make sure you choose the right auto insurance coverage
Car insurance is something most people don’t think about very often. Although there are many factors that lead people to change car insurance companies, it is important to educate yourself to ensure you choose the right coverage for you. The right coverage means not paying for coverage you don’t need and not giving up coverage that is right for you. Although price is a major factor, we also consider other factors such as customer service and the claims process when choosing what we believe are the best auto insurance providers.