Car Insurance Markets - Colorado, Kansas, Tennessee

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Car Insurance Markets - Colorado, Kansas, Tennessee

Introduction & Research Strategy

The car insurance markets for the states of Colorado, Kansas, and Tennessee are similar in the fact that the populations (and thus markets) are relatively small compared to the national state averages. However, each of these markets differ in terms of their legislative requirements, policy averages and minimums, types of drivers, insurance programs, and driving conditions. Below is a full SWOT (strengths, weaknesses, opportunities, and threats) has been provided for the car insurance market across each state. This information was located through an array of industry reports, national studies, and context related to laws that impact driving, such as DUIs and legal drugs. Each data point listed below is provided in conjunction with a statistic or value to compensate and verify the claim. This information is intended to act as a means for insights into the potential volatility and opportunities for a new entrant into the market for each state.


Colorado Car Insurance Market

Strengths
  • The number of fatal auto accidents in the state of Colorado as a result of traffic and auto accidents were as follows between the years of 2014-2016:
    • 2014 - 1.00 per 100M vehicle miles, or 0.11 per 1,000 registered vehicle miles
    • 2015 - 1.08 per 100M vehicle miles, or 0.11 per 1,000 registered vehicle miles
    • 2016 - 1.17 per 100M vehicle miles, or 0.12 per 1,000 registered vehicle miles
  • The traffic density in the state of Colorado between the years of 2014 to 2016 were as follows:
    • 2014 - 552,007 vehicle miles per highway mile, or 10,574 vehicle miles per registered vehicle
    • 2015 - 568,373 vehicle miles per highway mile, or 10,477 vehicle miles per registered vehicle
    • 2016 - 587,110 vehicle miles per highway mile, or 10,588 vehicle miles per registered vehicle
  • Colorado law for insurance follows a "File-and-Use" format, which essentially means an insurance provider can use new rates without receiving state approval. This legislation makes it possible for insurance companies to also have their rates determined largely by market forces.
  • Colorado law does not require insurance companies to file forms for private passenger auto insurance. Instead, they only need be certified by insurers.
  • Auto insurance companies in Colorado are not required to offer personal injury protection. They are, however, required to offer uninsured/under-insured motorist liability coverage.
  • The maximum speed limit in Colorado is 75 mph.
  • There is no law in Colorado that bans hand-held devices while driving. Use of cell phones while driving is banned for drivers under the age of 18.

Weaknesses
  • Seatbelts in Colorado are relatively controversial based on occupant ages. As of 2010, all children less than 1 year of age must be in a rear-facing infant seat, those ages 1-3 must be in a child safety seat, children ages 4-7 should be in a booster seat, and those under the age of 16 are treated as adults in terms of seat belts.
  • The 5 most prominent auto insurance providers in Colorado indicate that the market is saturated by large companies, including State Farm and Progressive, among others. This indicates that smaller business will struggle to hold a decent size of the market in the state overall.
  • In 2015, there were only 52 persons per square mile in Colorado. However, 86.3% of them were found in metro areas.

Opportunities
  • Auto premiums in Colorado have increased by 54.2% between 2011 and 2017. These rising premiums mean greater opportunities for revenue and a greater need for providers.
  • Reasons for the rising premiums are largely related to weather, including hailstorms, which means additional coverage is needed by drivers everywhere in the state, especially metro areas.
  • Lower gas prices in Colorado are bringing new drivers into the state, which means more traffic and increased accidents. These factors also contribute to rising auto premiums.
  • Legalized marijuana presents the opportunity for auto insurance providers to increase premiums, due to the potential risk of drivers getting on the road under the influence of the drug.
  • As of 2019, it was calculated that about 16% of drivers in the state were on the road without any type of auto insurance. Finding a way to reach these drivers could lead to a greater share of the market.
  • Auto insurance policies in Colorado for at-fault collisions typically increase by about $582, leading to a greater opportunity for profit.

Threats
  • In 2016, about 17% of auto insurance providers ended up paying out more in claims than they received from premiums. The number of accidents, while offering the opportunity to increase premiums, also poses a threat in terms of loss of profits.
  • The top 10 auto insurance providers in Colorado hold 85.31% of the market, indicating that it is very saturated. It could be difficult for a new entrant to make a stand in this market as a result.
  • The total number of auto crashes have increased in the state of Colorado by 4.4% year-on-year between 2012-2016, and 26.1% over the course of the five-year premium. Higher crashes increase the chance of losing money due to claims, despite income from premiums.

Kansas Car Insurance Market

Strengths
  • The number of fatal auto accidents in the state of Kansas as a result of traffic and auto accidents were as follows between the years of 2014-2016:
    • 2014 - 1.25 per 100M vehicle miles, or 0.6 per 1,000 registered vehicle miles
    • 2015 - 1.13 per 100M vehicle miles, or 0.14 per 1,000 registered vehicle miles
    • 2016 - 1.34 per 100M vehicle miles, or 0.17 per 1,000 registered vehicle miles
  • The traffic density in the state of Kansas between the years of 2014 to 2016 were as follows:
    • 2014 - 218,612 vehicle miles per highway mile, or 12,556 vehicle miles per registered vehicle
    • 2015 - 223,094 vehicle miles per highway mile, or 12,361 vehicle miles per registered vehicle
    • 2016 - 226,000 vehicle miles per highway mile, or 12,572 vehicle miles per registered vehicle
  • The maximum speed limit in Kansas is 70 mph.
  • There is no law in Kansas that bans hand-held devices while driving. Use of cell phones while driving is banned for drivers that are considered to be "novice."

Weaknesses
  • Kansas law for insurance follows a "Flex Rating/Prior Approval" format, which means that insurance companies are required to get approval from the state for any rate changes prior to implementing them.
  • Kansas law requires insurance companies to obtain prior approval from the state before filing forms for private passenger auto insurance.
  • Auto insurance companies in Kansas are required to offer both personal injury protection and uninsured/under-insured motorist liability coverage.
  • In Kansas, all occupants of a vehicle are required to be treated as primaries and must wear a seatbelt.
  • The 5 most prominent auto insurance providers in Kansas indicate that the market is saturated by large companies, including State Farm and Progressive, among others. This indicates that smaller business will struggle to hold a decent size of the market in the state overall.
  • In 2015, there were only 36 persons per square mile in Kansas. However, 68.3% of them were found in metro areas.
  • The damages to a vehicle in Kansas must be greater than 75% of the total value of the car prior to the accident in order to be considered "totaled."

Opportunities
  • About 7% of Kansas' population is completely uninsured when it comes to auto insurance. As a result, if a car insurance provider was capable of reaching this population, they could hold a relatively large chunk of the market.
  • Kansas as a state is expected to have projected employment rates to grow by 163,245 jobs by the year 2022, causing the employment rate to experience 100% employment across the state. This would

Threats
  • In Kansas, auto providers are required to accept drivers that have applied for coverage through the Kansas Automobile Insurance Plan based on their market shares of the industry. This means that whatever percent of the car insurance market a provider holds, they will be required to take on high-risk drivers in the same amount.
  • The average price of gasoline in Kansas $2.67 in 2019, compared to the national average of $2.60. Higher gas prices make it less likely for drivers to be on the road as often, meaning fewer accidents and lower premiums.
  • The top 10 providers of auto insurance in Kansas currently hold 81.41% of the market.

Tennessee Car Insurance Market

Strengths & Weaknesses
  • The number of fatal auto accidents in the state of Tennessee as a result of traffic and auto accidents were as follows between the years of 2014-2016:
    • 2014 - 1.33 per 100M vehicle miles, or 0.18 per 1,000 registered vehicle miles
    • 2015 - 1.25 per 100M vehicle miles, or 0.18 per 1,000 registered vehicle miles
    • 2016 - 1.35 per 100M vehicle miles, or 0.19 per 1,000 registered vehicle miles
  • The traffic density in the state of Tennessee between the years of 2014 to 2016 were as follows:
    • 2014 - 756,959 vehicle miles per highway mile, or 13,569 vehicle miles per registered vehicle
    • 2015 - 801,684 vehicle miles per highway mile, or 14,079 vehicle miles per registered vehicle
    • 2016 - 803,071 vehicle miles per highway mile, or 13,873 vehicle miles per registered vehicle
  • Auto insurance companies in Tennessee are not required to offer personal injury protection. They are, however, required to offer uninsured/under-insured motorist liability coverage.
  • Seatbelts in Tennessee are only enforced for front seat passengers, increasing the possible safety risk for occupants.
  • The maximum speed limit in Tennessee is 70 mph.
  • There is no law in Kansas that bans hand-held devices while driving. Use of cell phones while driving is banned for drivers that are considered to be "novice."
  • In 2015, there were 161 persons per square mile in Colorado. About 73.4% of them were found in metro areas.

Weaknesses
  • Tennessee law for insurance follows a "Flex Rating/Prior Approval" format, which means that insurance companies are required to get approval from the state for any rate changes prior to implementing them.
  • Tennessee law requires insurance companies to obtain prior approval from the state before filing forms for private passenger auto insurance.
  • The 5 most prominent auto insurance providers in Tennessee indicate that the market is saturated by large companies, including State Farm and Tennessee Farmers Group, among others. This indicates that smaller business will struggle to hold a decent size of the market in the state overall.

Opportunities
  • In Tennessee, 24% of the population does not have car insurance at all. Even reaching a portion of this market could greatly increase profits and market share.
  • In 2018, there were 5,796 DUIs across the state. As of March 2019, there were 1,433 DUIs in Tennessee, as well. This means that for every instance, car insurance providers typically increase their premiums by 42% for each instance.
  • The average price of gasoline in Tennessee for 2019 was $2.36, compared to the national average of $2.60. Lower gas prices mean more drivers on the road, leading insurance providers to increase their premiums and earn more money.

Threats
  • Drivers with a DUI in the state of Tennessee will only see their premiums increase by 42% increase, while the national average increases by 72%.
  • The national average for which auto premiums are increased by for DUIs is 72%, while in Tennessee, premiums only increase by about 42% after a driver gets a DUI.
  • The top 10 auto insurance providers in Tennessee currently make up 81.25% of the total car insurance market in the state.
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