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

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.

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.

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.

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.

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.

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.