Growing repair and replacement costs and labor challenges hampered auto insurers’ results in 2023. Will 2024 bring more of the same?
As we head into 2024, the motor vehicle insurance landscape will continue to evolve under inflation pressures, labor shortages, and escalating vehicle and repair costs. These economic factors, which continue to send ripples throughout the industry, are directly impacting policyholder’s premiums. They are also forcing insurers to adjust their pricing models to accommodate increased costs associated with vehicle repair and parts replacement.
Advanced technologies in new car models, while providing superior performance and safety, have also driven up the cost of parts and labor. As a result, even minor accidents can lead to hefty repair bills, causing insurance companies to reassess their risk calculations and premium structures.
This surge in premiums has made vehicle insurance a significantly larger financial obligation for the average consumer globally:
- In the U.K., the average premium paid for private comprehensive vehicle insurance was £511 ($649) in Q2 2023, a whopping 21% higher than one year ago.
- Insurance rates across the U.S. are expected to increase 4% in 2023, bringing the total average premium for full coverage to $1780 per year.
- Premiums in Mexico were up 17.8% in the first half of 2023 for auto lines.
Amid these challenges, the industry is seeking innovative ways to balance the scales and ensure insurance remains accessible and affordable. Insurers are increasingly leveraging technology to enhance risk assessment, streamline claims processing, and improve customer service — all in an effort to offset inflationary pressures and the increasing costs of parts. While challenging, this transition could mark a new era in vehicle insurance, one that merges technology and insurance and delivers better value to the consumer.
The following are a ffew key trends we can expect in the motor vehicle insurance industry in the coming year.
Accelerating claims becomes a top priority
According to J.D. Power’s 2023 report, U.S. customers said their average auto repair cycle time has doubled over the past two years — now exceeding 23 days. In the UK, workshop wait times have increased by 57% since before the pandemic, according to fleet specialist Epyx. The company said average lead times for service, maintenance and repair rose from 8.11 days in January 2020 to 12.76 days in September 2023.
Across the industry, the conventional claims process is still far too time-consuming. In the coming year, we can expect more efforts to improve antiquated claims processes to continue, led by the use of artificial intelligence (AI) and computer vision technologies, which can help accelerate assessments and settlements.
AI-powered visual intelligence technology can help insurers make sense of visual data and evidence the same way a human claims adjuster would. It can be used to gather evidence at the scene of an incident, analyze that evidence and potentially resolve a claim within minutes of first notice of loss. Moving forward, we can expect to see more insurers make use of this technology as a way to guide the policyholder through a remote but comprehensive evidence-gathering process that can then be used to determine a pre-repair cost estimation — all without the need to take the vehicle to a body shop for inspection.
Once evidence is gathered remotely, insurers can automatically check it against a database of previously collected evidence to identify any unusual cases and flag them for intervention by a human agent. Not only can this help accelerate the claims process but it also minimizes the potential of fraudulent cases.
Powering forward with personalized insurance products
Looking ahead to 2024, we can anticipate tailored insurance products — i.e., those that are specifically designed for individual driver and vehicle needs and preferences — to become the golden standard. According to Accenture, 62% of Gen Zers said they were more likely to buy insurance from a company that offers personalized services and prices.
The advantage of personalized insurance offerings lies in the ability to provide customers with coverage that aligns precisely with their unique circumstances. By using advanced analytics and data such as age, geographic location, and other relevant details about the driver and vehicle, insurers can craft policies that offer the perfect blend of protection and affordability.
This level of personalization not only helps enhance customer satisfaction, but also enables insurers to stand out in an increasingly competitive market. Understanding and addressing the specific needs of each individual driver will allow more insurance providers to establish themselves as trusted partners, offering peace of mind and reassurance.
Shifting towards the digital-first customer experience
Despite the rise in digital customer service options, one-third of claimants said they still needed to call their insurer following a digital update. From effortlessly purchasing policies to conveniently filing claims, the demand for a seamless digital insurance experience has never been higher.
Insurance companies will need to prioritize the customer experience in 2024 to keep up with the growing demand for quality digital-first services. The good news is that most insurers have already taken steps to improve their digital platforms, providing more intuitive mobile applications and self-service options that empower customers to take control of their insurance needs.
The trend towards engaging with customers wherever and whenever they prefer helps to ensure that policyholders feel connected and supported at all times. It can also enhance accessibility overall, making auto insurance services more readily available to a wider range of individuals and demographics.
Overcoming resistance to digital transformation
While advances in AI hold exciting possibilities for the insurance industry, more challenges are certain to emerge. Many insurers have already embraced some AI-driven technologies, however, there is still some resistance to digital transformation that the industry must overcome.
The best way insurers can navigate any digital transformation challenges is by gradually introducing automation, striking the right balance between technology and human touch, and automating specific processes while maintaining personalized customer interactions.
According to an SAI Partners report on claims management trends for 2023-2024, AI-driven automation can enable a 30% -50% reduction in customer service costs. It is also becoming increasingly possible for insurers to embrace automation without compromising the customer experience.
There is still so much untapped potential for innovation in insurance processes to improve and meet the evolving needs of the motor vehicle industry. With the new year around the corner, we can expect to see several noteworthy leaps, including more acceleration of claims processing with AI, more customized insurance offerings, and enhanced customer experiences with digitalization. Although these changes may pose new challenges for some insurers, they will also unlock exciting new opportunities for those that embrace them.
Julio Pernía Aznar is CEO of Bdeo, a technology company that provides visual intelligence for the insurance and fleet industries. A fast-growing insurtech AI startup with proprietary “visual intelligence” technology, Bdeo has increased its international presence by 30% over the past year and now boasts offices in Europe, Latin America, and Africa.