US auto insurance trends are undergoing a "revolution" – report

“The jury is still very much out on the long-term effects of these market trends impacting the auto insurance industry,” said LexisNexis vice president and general manager of auto and home insurance Adam Pichon. “While we have seen some traditional patterns reemerge with respect to miles driven and insurance shopping volumes, we saw another rollercoaster year due to volatile activity in claims severity, insurance switching, more serious traffic violations, and vehicle purchasing due to macroeconomic conditions.

“Add to that increasing consumer interest in telematics data and an active regulatory and legislative environment, and we are seeing more signs of a revolution in the industry than a rebound.”

The main highlights of the 2022 US Auto Insurance Trends Report include:

Auto insurance shopping and new policy growth numbers were volatile for the second year in a row.
Riskier driving behavior created a “notable shift in the driving violation data mix;” an abnormal rise in major speeding violations coincided with another yearly increase in traffic fatalities.
Claims severity increased even as more normal driving patterns returned. But the number of “touches” required to close a claim has not improved – 29% of consumers said they had to speak to three or more people to settle their claim.
Vehicle shortages and supply chain issues led to reduced car sales, and slowed down the adoption of advanced driver assistance systems (ADAS).
Miles driven rebounded to traditional patterns observed in 2019, but carriers now see a benefit in more accurate readings from connected vehicles.
71% of US consumers are interested in telematics-enabled usage-based insurance for purposes of discounts, a previous LexisNexis study in 2021 found. But consumer adoption remains much lower.
Some states are introducing legislation that can restrict the type of data collected for risk-based insurance scoring.

The findings line up with a previous LexisNexis report, which found that for the fourth quarter of 2021, US auto insurance shopping growth fell to -5.2%, from -3.9% in Q3 2021. The analytics firm noted that this drop came as an industry reaction to vehicle shortages and increased claims costs.

Read more: Auto insurance in the US – what’s happening to demand?

Pichon stated that insurers armed with accurate and comprehensive data are “poised to price and rate more accurately, handle claims more efficiently, and improve customer experience in the face of evolving market stressors.”

LexisNexis posited that 2022 could be another year of vehicle and insurance shopping volatility. The firm also said that current economic uncertainty and continued risky driving behaviors suggest that claims severity for 2022 will remain high and that it will continue to monitor the regulatory environment.

“The insurance industry is in a critical phase,” said Pichon. “There are so many unknowns, and insurers, no matter the size, who adapt by using data and analytics to enhance their workflows and meet customers where they are will be positioned to make better, more informed decisions and gain market share.”