Insurers look at challenges, efficiencies for 2024
According to data collected by J.D. Power, 2024 will present many new challenges and shifting trends in the insurance industry. The firm recently shared some useful insights into what may be on the horizon for the year ahead.
Customers are unbundling for savings
“Bundle and save” has been a point of emphasis for carriers for years, the report pointed out. But with premiums increasing across the board, customers are starting to find out that decoupling their carriers may boost their savings. According to J.D. Power research, customers are increasingly interested in usage-based insurance (UBI). That interest is disrupting the decision to bundle auto and homeowners’ insurance, with many customers finding their best deal is to have a UBI-based auto policy and a homeowner’s policy with a different, lower-priced carrier. In 2023, 66% of customers with less than one year with their home insurers bundled their home and auto insurance, according to the survey. That’s down from 76% a year ago.
Customers with more than a year with their home insurer showed more willingness to bundle, with 77% bundling home and auto, up slightly from 76%. But with no signs of premiums slowing down, J.D. Power said that it expects UBI to play an even larger role in insurance shopping in 2024, as customers become more skeptical about their carriers willingness to unbundle and price-shop their coverage.
Firms are offsetting high costs with value
In the face of heightened emphasis on rate adequacy, insurance carriers are left with no other option but to increase premiums. But that means it’s essential that carriers show an overall value proposition for auto and home insurance policies. For customers who either want to stick with their current carrier or who don’t find a better option, the focus shifts to reducing the costs of their policies. If the carrier hasn’t already conducted a proactive outreach offering a policy review, customers will be reaching out to their agents or insurer seeking ways to mitigate their higher premiums. This presents an opportunity for carriers to highlight the existing and potential value of the policy and the advantages of being their customer, the report said.
Strategic partnerships between insurers and other companies are one way J.D. Power has seen carriers create additional value to their offerings, and the firm expects to see more of this moving forward. For example, starting in 2022, one carrier began partnering with a mortgage company to provide its customers with savings on a home loan or refinance. Another partnered with a home security company to provide their homeowners with free, smart home-security systems, sensors, and installation, as well as a reduced rate on monitoring.
Many are harnessing the power of AI
Insurers are unlocking ways to harness the power of artificial intelligence (AI) and machine learning as well, hoping this can alter the cost-benefit equation for customers, the report said. Insurers have begun factoring in this powerful new technology into their product pricing, internal operations, sales, and servicing. Carriers that figure out how to do this quickly and effectively are positioned to reduce costs through better risk assessment, claims handling and fraud detection, while increasing sales through expanded distribution channels, acceleration and automation of the underwriting process and more personalized pricing and product offerings, the survey said. Ultimately, this will improve the customer experience and give insurers more tools to have faster responses to customer requests and issues—including initiating claims—and ease the burden on agents and contact centers.
Digital adoption is on the rise
Longer claim timeframes and rising claims costs are also putting pressure on carriers to find efficiencies in their claim operations. Loss ratios remain high after two years of double-digit increases and are forcing insurers to focus on speed, efficiency, and accuracy – buzzwords J.D. Power said it is hearing in conversations with claims teams. The challenge here is not to lose sight of the customer experience, which is already strained by very long repair times, and digital solutions present a key opportunity. For example, in total losses, industry leaders are using technology to determine totals notably more quickly and they are experiencing positive results in cycle- time reductions and improved customer experiences.
J.D. Power said that it has also seen increased usage of digital channels for claim reporting and communication and expects this growth to continue. More than one-third (36%) of respondents said that they texted their insurer, while 30% have used website/apps. That makes texting the second most-popular digital method behind email (50%) and is among the most satisfying channels.
However, not everyone wants to engage in digital channels throughout every aspect of their claim, the report pointed out. As a result, another challenge for insurers is to engage with customers in their preferred interaction channel, which is key to overall satisfaction. In fact, the firm finds that less than one-quarter of customers want to manage their claim entirely via digital channels. However, those who do, have high levels of satisfaction, suggesting that the tools work well for those who prefer them.
But nearly 40% of customers have an equal preference for both people and digital interactions. As a result, even in this digital age, carriers will have to continue to have claim staff be available and responsive, and keep customers informed. That could prove challenging, with high caseloads and longer-tailed claims continuing in the future, the report said.
Impact of these trends on agents
Trends to impact agents
These trends will no doubt have an impact on how agents manage their practices in 2024. To find success, agents will want to be more proactive in providing value to customers through targeted policy reviews that address ways to save customers money while maintaining adequate coverages, suggested Stephen Crewdson, senior director of insurance business intelligence at J.D. Power. Independent agents, who can compare premiums and coverages from many different carriers, will want to consider proactively shopping on behalf of their customers more in 2024 than they have done in the last few years.
“Agents told us in 2023 they are already proactively shopping more often than in the past, but this is likely going to be heightened even more in 2024, as premiums continue to increase,” he said.
To increase their customer base and boost client retention, Crewdson said that agents should take the following steps:
Recognize that insurance shoppers are more price-sensitive than in the past. Bundling auto and home insurance may not be the best option for some consumers, for example, when auto insurance with UBI through one carrier and homeowners/renters’ insurance through a different, lowest priced carrier, may provide more value to the shopper than bundling with one carrier.
Help consumers better understand why insurance premiums are increasing. More expensive vehicles, parts, repairs to houses, etc., are driving up the cost of claims, and insurers are paying out more money than before. “By increasing premiums, they are making sure they have sufficient funds to pay claims into the future,” Crewdson explained.With their wallets taking a hit because of rate increases, customers are going to be more discerning and less brand loyal to their insurers, the report said. That means they are going to be looking for tools and information to help them better understand their policies, the reasons for the rate increases, and what they can do to bring those costs down. By meeting customers where they are in 2024, insurers can find a way to earn a new level of loyalty, even amid harsh conditions.
This Insurance Intelligence Report is based on responses from the J.D. Power 2023 U.S. Insurance Shopping Study, J.D. Power 2023 U.S. Home Insurance Study, J.D. Power 2023 U.S. Auto Insurance Study, and J.D. Power 2023 U.S. Auto Claims Satisfaction Study.
Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at amseka@INNfeedback.com.
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