Keeping Up: 5 Auto Insurance Trends That Must Be Met With Digital Transformation in 2022

BY: CHAD SPIVACK
MARCH 2, 2022

Hint: Millennials dominate, and insurers are being challenged to step up and meet their expectations.

Key Takeaways:

  • The insurance industry continues to change rapidly, and nowhere is that more apparent than in auto insurance.
  • Industry leaders must keep up not only with technology but with customer buying trends.
  • Millennials are now the largest customer segment, and their needs and wants are very different from the once-dominant boomer demographic.
  • Today’s drivers want flexible payment options as well as insurance based on their individual driving habits rather than factors such as age, location, occupation, etc.

There’s no doubt the insurance industry is changing and changing rapidly, especially when it comes to the auto insurance industry. Increasing competition in this market is just one trend in auto insurance that industry leaders must pay attention to, along with changing demographics, innovative vehicle technology, and usage-based insurance (UBI).

These trends in auto insurance bring some challenges. They also bring opportunities that can only be realized with the kind of digital transformation that provides the flexibility and creativity required to adjust to the new paradigm.

Executives will need accurate, real-time data that’s rapidly analyzed to adapt premiums for new driver assistance technology, for example, for which they have no historical data. They must re-calibrate their business model to accommodate Gen Z and deal with today’s on-demand mobility services, including vehicle subscription services.

With 41% of policies being shopped around by drivers, staying ahead of the competition means not only understanding these trends in auto insurance. It also requires using every tool at your disposal. In this article, we’ll discuss these trends and why the only way to weather the disruption is with digital transformation in auto insurance.

Trend 1: Changing demographics

The rise of Millennial consumers is having a huge effect on the auto insurance industry. In 2021, this population – born between 1981 and 1997 – will surpass Baby Boomers in buying dominance, and these buyers have different needs and wants than the Boomers:

  • Millennials are more likely to purchase insurance online.
  • They want to do their research online and connect with agents via digital channels.
  • They care a lot about getting comprehensive coverage at a good price (more than half).
  • When it comes to the purchasing process, 36% want it to be as easy as possible.

Millennials also want information at their fingertips, are less likely to want face-to-face interactions with agents, and while they know they should have insurance, only 64% actually have auto insurance. This brings us to the rise in usage-based insurance (UBI).

Response: Create the right digital experience for this market. This means a cohesive experience across all channels and as little human interaction as possible, which can be achieved with the use of chatbots. To further reach this segment, mobile apps are essential. Digital transformation in auto insurance means also giving your staff the information they need at their fingertips through intelligent technology.

Trend 2: Usage-based insurance

Millennials only want to pay for what they use, which makes UBI especially appealing to this segment. Linking their rates to their driving behavior seems fairer to them than basing what they pay on demographic features such as age, gender, credit score, and occupation. Fully 75% want a pay-as-you-use policy.

Response: Offer flexible ways to allow millennials to purchase insurance. Develop a focused approach, invest in UBI technology, partner with UBI/telematics providers, and upgrade core applications to support UBI.

Trend 3: Advanced vehicle technology

More than 50% of the cars on the road today include technology such as a navigation system, blind-spot detection, collision avoidance and surround-view systems, and automatic braking and parking assistance. These technologies were supposed to result in fewer accidents, which in turn was supposed to lead to lower premiums, but that hasn’t happened due to the high cost of repairs. Autonomous vehicles also are expected to cut accidents.

However, auto insurers do not have the necessary data to know the real risk of advanced driver assistance systems and, therefore, have difficulty setting premiums.

Response: Use every bit of data at your disposal – especially telematics data – to assess behavior related to acceleration, braking, and routes used. Underwriters can use this information to set policy prices that accurately reflect price versus risk.

Trend 4: New sources of data

Telematics provide a rich new source of data to inform underwriting as well as pricing based on mileage and driver behavior. Risk assessment can be based on individual driver behavior instead of average group data and thereby reduce rates.

Response: Digital transformation in auto insurance is a must here. Spreadsheets will not do. You need the power to handle huge amounts of data. It is predicted that connected cars will collect in excess of 11 petabytes of data every year. It’s not just about gathering data – precise analytics are required. Your company must use this data to create personalized customer experiences while optimizing operations and enabling informed decision-making.

Trend 5: Vehicle subscription services

Most millennials own cars, but 26% say they would consider a vehicle subscription service, which is when you pay a monthly fee directly to a vehicle manufacturer or a flexible car marketplace for access to its vehicles. Insurance is supplied by the manufacturer or marketplace, which means the driver does not have to purchase a policy on their own. Subscription services mean a lack of long-term commitment.

Response: Strike partnerships with manufacturers to provide insurance services, or with startups that are exploring alternatives to car ownership. This type of alternative to leasing or buying a car should be on the radar of insurance executives.

The world of insurance is changing, bringing both headaches and opportunities. Insurance company executives must continue to evolve as well, embracing both change and the digital transformation that will effectively manage it.

RD Global: Powering your engine of change

At RD Global, we empower insurance companies with high-impact technology solutions that keep you at the forefront of the industry. Customers are king, so our solutions are rooted in a 5-star customer experience that engenders trust and loyalty.

Our unrivaled team of in-house technical experts can solve your most complex digital challenges with state-of-the-art custom insurtech software to power your digital transformation.

Only the digitally strong will survive and prosper. Schedule a discovery call to learn how RG Global can help build your success now and in the future.

Written by CHAD SPIVACK

"Process Architect @ RD Global. IT professional with expertise leading an Intelligent Automation practice. Chad has managed multiple end-to-end, automation projects and currently holds 5 separate RPA certifications."

MARCH 2, 2022
RD Global Empowers Insurance Companies to optimize total digital experience, unify data, and harmonize processes by developing high impact technology solutions infused with a 5-star customer experience.