Why Are Auto Insurance Rates Rising?

If you’ve recently shopped for or renewed your car insurance, you probably noticed a price increase. So why are auto insurance costs rising? Inflation, of course. Have you heard that word lately? I figured as much. Every company, customer, and country around the world is currently dealing with inflation, and, unfortunately, Auto Insurers aren’t immune.

This spells trouble for carriers and customers alike as rising costs are leading to rising premiums.

However, when we break it down – there are a few other factors contributing to this rise in auto insurance costs…

  • The Cost and Complexity of Auto Parts: Not only are the costs of parts up over 17% YOY, but vehicles are exceedingly more complex than they ever have been. It costs a pretty penny to replace the built-in navigation system or rear-view camera, and claims payouts have to reflect that cost. This doesn’t even factor in the price of labor, or rising medical costs. 
  • The Impact of 3rd Party Data Checks: The price of pulling just one MVR now costs carriers over $10 per person – a price that is over 35% more than in previous years. This adds up to over $1 billion dollars per year on MVRs alone. Even though 75% of those insured have clean driving records, missed violations still end up resulting in $3 billion in premium leakage – so are these 3rd party data checks a necessary evil?

What does it mean for Auto Insurance costs? 

For Carriers – it means raising premiums to build up their claims reserves, retaining their current customers despite rate increases, and trimming the fat on their 3rd party data checks (which has a downside). 

For Customers – it means that more than usual, people are price shopping with different insurance carriers. They’ll also be looking deeper into their coverage, and potentially think about downgrading or looking for discount options. All in all, they’ll be more engaged with both their current carrier and potential new ones. 

How can Auto Insurers begin to combat this?

Two words…Intent Data.

Carriers are increasingly looking to new technologies and datasets to offset the rising costs they’re facing. For instance, new solutions like Behavioral Intent Data can have an impact on each of these issues. Intent Data Solutions like ForMotiv’s provide real-time intent scoring during the application and claims process to help carriers make smart, more efficient, and less risky decisions. Let’s discuss…

Issue: The Cost and Complexity of Auto Parts

Solution: When someone begins their FNOL on a carrier’s website, there are many instances of claims fraud where the applicant is “financially motivated” to answer questions in a certain way to receive the maximum payout. Intent Data is capable of showing behavioral patterns that are indicative of claims fraud and allow carriers to intervene in real-time once those behaviors are exhibited. This gives carriers the power for more precise claims payouts and therefore reduces the $80 billion dollars lost to claims fraud each year. 

Issue: The Impact of 3rd-Party Data Checks

Solution: As you just read, 3rd party data checks are pricey. $1 billion dollars a year pricey. Auto carriers are calling for MVRs early in the application process and for nearly everyone, regardless of whether or not they purchase a policy. By knowing the intent of the user while they’re filling out their digital application, carriers can make more precise decisions on not only when to call for an MVR, but also whether or not it’s worth it at all. 

The Bullish Opportunity for Intent Data

Finally, a positive. With more people price shopping for Auto Insurance right now, carriers have the chance to acquire new business that they may not have otherwise had. By knowing whether or not the user is a window shopper, likely to purchase a policy, or somewhere in between – there is a huge chance to beat out your customer not only with better prices but with a more personalized customer experience.

How can “Intent Data” help with this? Here’s a few ideas:

  • Prioritizing agent follow-up based on the intent to purchase
  • Adjust email and paid marketing campaigns to prioritize high-intent leads and offer different treatments for window shoppers
  • Route leads by their preferred channel so they are able to convert over the most profitable medium 
  • Identify risky behavior and prevent premium leakage and misrepresentation during the application process

None of us can control the Fed, and none of us know what’s going to happen with inflation, so let’s focus on what we can control. For now, “Intent Data” is an effective way to combat the impact of inflation, understand the purchase intent of your users, trim the fat around additional costs weighing carriers down, and avoid fraud.