For the past 10 years, the key word for improving auto insurance quoting has been ’faster‘. Carriers have been continuously looking for ways to get their customers through the quoting process and into a bound policy with less touches. Sleek user experiences, 3rd party data integrations, and more automated underwriting algorithms have come together to make buying insurance easier than ever before. But the industry may be finding that quote speed alone should not be the focus.
Customers First, Process Second
When speed to quote becomes the name of the game, we assume that faster equals better. Based on recent CCC consumer research, there’s certainly more to customer satisfaction than just speed. One notable find: the difference between the average customer expectation and the actual time it usually takes to get a quote was only 13 seconds.1 Clocking in at just under 25 minutes, the length of the process is not what’s driving customers’ decision making. In fact, when considering 10 different decision factors, ‘ease of process’ ranked only sixth.1
While no one is denying the value of a smooth, fast user experience, it may now be time to think beyond speed and take a more holistic approach to increasing close rates and retention.
While actual quoting speed may not be a deterrent, time begins to matter when we take a closer look at the overall buying process. Customers do shop around, but typically request quotes from 3 carriers or less, and tend to make same day decisions, 53% of them in less than 6 hours.1 With minimal time to make the case as the best choice for a customer, the importance of insurers’ delivering an offering that stands out for accuracy and personalization becomes crystal clear.
While online quoting might seem like an option, CCC found that most customers are split on their preferred method of carrier research. Spread across carrier website (37%), agent phone call (35%) and in-person visits (26%), there is no effective singular path to quote.1 One size does not fit all for customers, so it shouldn’t for insurers either. By optimizing the full insurance buying experience, including the factors that comprise the quote, a carrier won’t just be one of 3 finalists, but have a chance to stand out within the buying window.
Pricing for the Future of Mobility
It will come as no shock to insurance professionals of all experience levels that, according to our research, the number one deciding factor for purchasing auto insurance is the cost of premium.1 However, insurance is not an industry that can simply streamline expenses and offer lower prices. Risk assessment doesn’t work like that. Insurers must ask, how can we better assess risk to better inform price?
Telematics, driving a sea-change in risk assessment, has allowed insurance carriers to better understand how people drive, and new advanced vehicle technology is going to do the same for the vehicle itself. Advanced Driver Assistance Systems (ADAS) use a combination of sensors and AI to help people drive safely, such as with automatic braking or lane change assistance, sometimes going as far as taking control of the vehicle to try to prevent a crash. The vehicle itself has become an active participant in the driving experience – and it’s time for insurers to think of it accordingly.
This means understanding the relationship between ADAS features, crash physics, and the resulting vehicle damage and injuries. A good start for most carriers is to know the exact features installed on a particular vehicle, and eventually, it will become even more important to understand how drivers are using these new features.
For example, vehicles with safety technology installed and actively used are less likely to be in claims, and when claims do occur, they will be less severe, allowing carriers to offer the customers driving those vehicles lower rates and increase conversion and retention. With the ability to review driving behavior plus mechanical and technological performance in near real-time, carriers can begin to tie a vehicle’s technology to how that vehicle is being driven. All of this means carriers can reduce information blind spots and price vehicles with more precision than ever before.
The COVID-19 Effect
Due to the pandemic, the likelihood that consumers turn to UBI is increasing. A recent JD Power survey indicated that 40% of customers are more likely to consider it now vs. before the pandemic.2 Carriers must be prepared for this shift and be able to leverage UBI’s rapid growth in a post-COVID world.
Even if driving levels begin returning to normal, customers have already started rethinking their auto-insurance. With travel restrictions and less commuting, typical mobility has declined, likely having a long-lasting impact in how rates are set.3 The pressure is on to move away from historical rating factors such as credit scores, vehicle make/model and demographics because they simply don’t paint a complete picture of an insurance customer. Beyond consideration of the technology on a given vehicle, how many miles are being driven? What are the driving patterns of the applicant? What time of day are they usually on the road?
These questions are not just posed to insurers. Their customers are asking themselves the same thing, ‘Why am I paying so much for something I’m not using?’. While early adopters of UBI may enjoy a discount from their carrier, the expectation of benefits are likely to grow with UBI’s appeal. While before the pandemic 50% of customers under the age of 34 generally liked the idea of UBI, two major deterrents to making the switch were preferring a fixed premium and having concern over higher prices dependent on their driving.1 Given the current and potential future state of driving, these may not seem quite so scary anymore.
Additionally, an increasing number of state and federal legislators are pushing to eliminate demographic and non-driving data from the rating process. Insurance rates may be in the news due to the reduction in driving, but much of the push to evolve is coming from broader social movements aimed at the above-mentioned factors, such as credit score and education level, that disadvantage groups of people. While insurance professionals know that the use of these traditional factors are actuarially sound, the political winds may turn against demographic ratings. Combined with the more predictive nature of new data sources, it may be time to look towards a new world of risk pricing and adopt customer driving behavior as the primary pricing factor. As an example, in August of 2020, technology-forward insurance carrier, Root Insurance, announced their intent to eliminate credit scores from their rating and reduce or eliminate other non-driving factors from their rates, signaling that significant change may be coming to the industry. 4
Interest in pay-per-mile programs (PPM) may also see an uptick in 2021 due the continued reduction in driving miles. In this case, carriers can capitalize on customers who are much more aware of how much they are actually driving.
However, one of the limiting factors for such programs is the reliance on expensive dongle technology. That expense is compounded by the fact that PPM policies tend be cheaper than traditional policies (otherwise customers wouldn’t buy them). It’s difficult to execute PPM with mobile telematics without a vehicle tether due to the need to be very exact on what vehicle is being driven. Further, customers can artificially reduce their premium by not bringing their mobile device.
In this case, the answer once again brings us back to the connected car. The data required to support PPM programs is lighter weight than required for driver scoring and carriers can receive it in trip or daily feeds from the vehicle. Leveraging connected car data will allow carriers to accelerate PPM adoption without the operational and cost burdens of dongles.
Time to Act
The personal auto insurance market is poised for a serious shake-up as customers change their driving and buying behavior. This means insurers looking to grow are going to have to rethink their customer acquisition, pricing, and product strategies to adapt to the environment. It also means moving beyond traditional pricing, experience, and technology strategies and looking forward the future of mobility.
Carriers can leverage new data sources for unprecedented insights into their risks and take advantage of wider customer trends. Carriers might also take advantage of the huge investments that OEMs are making in vehicle safety technology and consider the vehicle more as an active participant in the driving experience. Lastly, carriers could leverage telematics across the customer experience to innovate in new, compelling ways for customers. The future of mobility is here, and the world is changing faster than ever. It’s time for carriers to look ahead.
1Car insurance Purchase Behavior Study, Hanover Research Prepared for CCC
2PD Power Insurance Intelligence, Auto Insurance During COVID-19: Premium Relief: Consumer Impact and Outlook, April 16,2020
3CCC Trends Report, November 2020
4BusinessWire, Root Insurance Commits to Eliminate Bias from Its Car Insurance Rates, August 6, 2020
