Property & Casualty Market Suffers Significant Losses According to the Insurance Information Institute, the property/casualty (P/C) industry, which includes auto insurance, totaled $533.78 billion in premiums for 2016, accounting for just less than half (47.2%) of all insurance premiums. Industry employment in property/casualty increased 8.1% among insurance carriers and 19.0% among insurance agencies and brokers from 2015 to 2016. Even so, net income after taxes decreased 25% during the period due to increased losses. Net premiums increased 2.7% to $528.2 billion during 2016, but losses totaled $318.0 billion, a 9.4% increase from 2015. Policyholders’ surplus reached an all-time high of $719.4 billion for the first three quarters of 2017, driven by unrealized capital gains.

A More-Expensive Financial Burden The price of auto insurance premiums has increased faster than the general cost of living since 2009. During 2017, premiums increased 7.7% while the cost of living increased 2.1%, medical care increased 2.5% and hospital services increased 4.9%. Personal auto insurance rates have increased, in part, because of the large number of new vehicles being purchased; 2017 was the third consecutive year with sales of more than 17 million new vehicles, which tend to have more insurance coverage. During the past two years, there have been more auto crashes because of a variety of factors, including more drivers on the road (especially during rush hour, with an additional 10 million people employed), bad weather and distracted driving.

A Peek into the World of the Independent Agent According to a 2018 J.D. Power survey of independent insurance agents, they are the largest and most preferred channel for consumers and write 35.5% of all personal and 83% of all commercial lines. Independent agents want P/C insurers that can offer specialty risk coverage in addition to standard coverage. Unsurprisingly, they are most satisfied with insurers that pay higher commission rates. Insurance agents carry, on average, 8 different carriers for personal and 11 for commercial insurance. They are able to offer bundled policies to consumers 44% of the time and commercial 37% of the time, leaving money on the table for insurers.

At Risk of Obsolescence There were 40,100 2017 traffic fatalities, just slightly fewer than 2016’s 40,327. Approximately 4.57 million people were injured during 2017, essentially unchanged from 2016. The death rate for 2017 was 12.28 per 100,000 of population, a 2% decrease. Newer vehicles are equipped with high-tech sensors that are 5 times as expensive to replace in the event of an accident. More frequent and severe hurricanes also cause damage to vehicles, including the approximately 1 million Hurricane Harvey damaged. Eventually, the universal deployment of self-driving vehicles could make auto accidents extremely rare (and auto insurance obsolete). Insurers estimate 25–50% of vehicles would need forward collision prevention systems to offset the higher price of sensors.

Future Factors of Auto Insurance Insurers can use telematics (devices or apps that measure how far, how often and how safely people drive) to price policies more effectively. Almost 100 million drivers worldwide are expected to have usage-based insurance (UBI) by 2020. Insurers, such as Liberty Mutual, offer discounts to customers who drive vehicles with active or passive advanced safety features. Tesla currently includes auto insurance in the price of its vehicles sold in Asia. Auto manufacturers of smart cars may decide to follow Tesla’s lead during the future.

Advertising Strategies Local agents may find early-morning, local TV news a good opportunity to brand themselves and generate leads by asking the question, “Do you feel totally protected in the event of auto accident when you drive to work this morning? If not, then call me.” Highlight cost savings when customers bundle different kinds of insurance, similar to how tech service providers, package Internet, mobile, TV and/or phone service. Offer discounts to consumers with telematic devices or apps and base their rates on actual behavior, not external factors that may have no impact on driving safety.

New Media Strategies When you enroll new customers in one of your savings programs, photograph them and feature them on social media with their savings as social proof. Highlight the ease of making and tracking a claim using your Website. For teen drivers, send parents an electronic badge for every 3 months their children are without a violation or accident.