Analysis - Auto Insurance Industry

of two

Auto Insurance: Trends

A trend for the automotive insurance industry within the United States that is coming from the consumer side is the rise of the gig economy which is challenging the way insurance companies are offering policies for gig economy vehicles. On the industry side, the rise of technology is driving insurance rates, and the insurers are offering usage-based insurance to users. Additionally, companies are offering chatbot support more than in any other industry. From the regulatory side, the industry is experiencing a decrease in global regulatory coordination with each country tailoring their own rules for the insurers in the immediate future.


  • According to the Labor Department’s 2018 report, 15 million Americans are working as gig workers.
  • KPMG reported on the gig economy being one of the biggest trends for insurance companies for 2019 and onward due to the fact that 35% of the overall workforce currently in one way or the other participate in the gig economy, while that number is projected to rise to 43% by 2020.
  • With the rise of the gig-economy, specifically peer-to-peer ride sharing, insurance companies have had to determine how to incorporate these activities into insurance policies.
  • Since the activities do not fall solely under commercial or personal, insurance companies have had to determine how provide insurance. Many are offering add-on policies.
  • While the traditional insurance companies are still trying to understand how to provide the best services for gig workers, there are many "successful joint ventures and partnerships running between incumbent insurers and insurtechs in the sector that they can often represent the easiest and fastest way for traditional carriers to embrace these micro, scalable, on demand products."


  • The reason why technology has an impact which is considered to be creating a trend within the industry is the fact that today, cars offer multiple features that are similar to smartphones, high-definition televisions and smart home devices. By constantly improving the technology offered within cars, the insurance industry is looking for ways to insure the whole car — including the devices which are primarily technology devices.
  • Despite new technology in cars that make them safer, auto insurance rates are going up. With increasingly more complex components, cars are becoming more expensive to repair after a collision. In addition, they are taking more time to repair and require specialized mechanics.
  • The best example of rising auto insurance rates is the fact that in 2014, repairing the bumper of an entry-level luxury car cost $1,845, while the same repair cost $3,550 in 2016. This cost difference is almost exclusively due to the parts that are needed for the 2016 model, as the upgraded model comes with a distance sensor in the bumper.
  • Moreover, in the last ten years, the technology trend impacted the car industry in such a way that currently, 7% of the global car manufacturers offer seamless connectivity via IoT and built-in safety technology in the cars they sell.


  • New players and insurance delivery models are disrupting the auto insurance market. Usage Based Insurance uses telematics-technology to track driver behavior and bill premiums accordingly. UBI variations include Pay-As-You-Drive (PAYD), Pay-How-You-Drive (PHYD), Pay-As-You-Go, and Distance-Based Insurance.
  • It is estimated that in 2019 and onward, user-based insurance (UBI) plans will "allow car insurers to track the driving behavior in order to assess the risk and calculate the premium rate accordingly."
  • Moreover, usage-based car insurance plans will track driving pattern by utilizing mobile apps and sensors to provide discount to disciplined and safe drivers.
  • According to market reports, usage-based Insurance Market will hold a major market share of around 66% by 2024, making it the key driver of the car insurance market.
  • Additionally, UBI market segment for commercial vehicles segment is projected to see the fastest growth rate of over 18% from 2018 to 2024 based on the adoption of telematics and further vehicular technologies.


  • In 2018, the car industry saw chatbot technology getting immensely popular, with industry reports stating the trend is only going to grow in popularity due to chatbot technology taking over multiple industries in the future.
  • An example of high utilization of this trend is a Poland-based online car insurance company called Link4 that uses a chatbot called Magdato to help policyholders claim settlement faster by offering them unified support and on-time resolutions backed by chatbots.
  • The reason why chatbots are considered to be a trend is the fact that according to the Global Trends Study, insurance companies invest an average of $124 million into chatbots each yer, which is approximately $54 million more than the average across all other industries surveyed.


  • In car insurance, as well as other insurance areas such as health and real estate insurance, the global regulatory approach is expected to dramatically change in 2019 and 2020.
  • According to Deloitte, the aftermath of the "financial crisis saw a globally coordinated response to draw up a series of new regulations that would underpin a more robust and stable financial system."
  • However, starting in 2018, the countries started to move away from global policy making and are showing "reduced appetite for cross-border regulatory cooperation."
  • As a result of this trend displayed by the government agencies across the world, there are "increasing signs of regulatory divergence, including geographical and activity-based ring-fencing, as different regions and countries look to tailor regulations to their own needs."
  • Global car insurance companies are going to be challenged with having to comply with divergent rules across the globe. On top of that, the companies will have to find a way to "optimize their local governance structures, operating models, legal entity structure, and booking models."
of two

Challenges & Opportunities for US Auto Insurance

The following are 5 current or near-future challenges and opportunities for the automotive insurance industry within the United States: 1) New and emerging technologies, 2) Increased accidents, thefts, and disasters, 3) Monitoring and privacy concerns, 4) Ridesharing/car-sharing services, and 5) Disruptors and modern human behavior.


  • Vehicles today are being integrated with new technologies, such as driver assistance and connectivity capabilities to help ensure more safety both to lives and vehicles. Artificial intelligence is being applied to interpret market consumption of insurance consumers.
  • The ability of a driver to give up some of his driving decisions to pieces of technologies poses a challenge to the premium coverage issued by auto insurers.
  • The Advanced Driver Assistance Systems (ADAS) is one of the newest technologies being integrated with motor vehicles, and this ensures safety measures for drivers and pedestrians alike.
  • While an approximately $167.94 billion were losses recorded by auto insurance data in 2017 in the US, "the increased use of ADAS systems and other safety measures have been slowing down the trend."
  • It is estimated that vehicles manufactured with these new technologies will reach an annual number of 105 million by 2020 and ADA units are predicted to be of higher sensitivity.
  • In a society where an average of 300 insurance companies are into personal auto insurance, there is a high probability of a decline in premiums and a shift in coverage.
  • In this challenge, however, there is the opportunity for insurance companies that take early cognizance of this to improvise and act along with this change; to create innovative products and coverage that will address the needs of this evolution.
  • American auto insurance firms such as State Farm and Allstate are already deploying artificial intelligence such as machine learning algorithms to help them meet consumers' needs.


  • The US has over 283 million registered vehicles and the yearly drive by an average American is 13,500 miles per year.
  • The above data presents opportunities to auto insurers as it is estimated that "car accidents still kill more than 1.2 million people yearly."
  • Some vices that result in high road mortality include speeding, driving under the influence of alcohol and other psychoactive substances, distracted driving, to mention a few.
  • Crashes in states such as Colorado, Nevada, Oregon, and Washington have risen as much as 6% after the legalization of marijuana for recreational use.
  • Statistics indicate that student drivers pay more annually for auto insurance as they are more prone to car accidents.
  • It is a constant factor that one will likely hit a deer while driving in West Virginia than in any other US state.
  • The amount of $7,708 is the average dollar loss per auto theft in the US with an average of $6 billion in a total loss to auto theft in 2017.
  • It is estimated that more than 770,000 cars get stolen every year in the US; meaning more than one car gets stolen per minute.
  • While the report suggests that there was a decline in auto theft since the early 2000s, the 2019 auto insurance statistics said: "there has been a spike in recent years."
  • The period of Hurricane Harvey left up 1 million cars destroyed, which was more than any recorded event in the history of the US.
  • Industry statistics reveal that "50% of all cars destroyed by the hurricane were from Houston, America’s fourth most populated city."
  • Although the above-mentioned facts are vices in any society, they present current and future opportunities for industry growth for the automotive insurance industry within the US.
  • To buttress the growth, an industry report reveals a 3.3% growth in the US auto insurance market from 2014 to 2019 and 1.2% in 2019.


  • The automotive insurance industry within the US has been known to use the traditional model based on series of variables in setting premiums, but the advent of new technologies in the mobility ecosystem is posing a major challenge to this.
  • As with the traditional model, insurers were not able to keep track of drivers' actions and behaviors on the steering wheels; therefore, they have to rely on the drivers' records and possibly follow up on inaccurate assumptions.
  • But the advantage of insurance companies being able to use a usage-based insurance (UBI) model to monitor the real-time behaviors of drivers will enable them to personalize policies, reduce their losses, and limit car accidents.
  • In the use of ADAS for instance, privacy concerns are inevitable even though drivers may be willing to let insurance companies monitor their driving behavior.
  • And without usage-based insurance (UBI) policy from the industry regulators, the issue of privacy concerns of individuals will be an unresolved issue.
  • As much as this is a challenge, the opportunity here is that the automotive insurance industry will have the chance of being in the driver's seat in fashioning out an ideal framework with lawmakers and regulators; to create the needed balance between clients' privacy and their opportunity of consolidating their gains on auto insurance policies.


  • One of the challenges facing the automotive insurance industry within the US is the increased investment in car sharing.
  • It was projected that by 2019, this industry market would reach $2.4 billion.
  • The trend in this industry is believed to impact a change of view in the manner in which vehicles are used in the future as it concerns vehicle safety, increased asset utilization, and vehicle ownership models.
  • According to the report, "about 60% of the US auto insurance customers are willing to share their car’s data with the manufacturer."
  • Another 60% of new car owners residing in the US are disposed to sharing the data their car collects to the manufacturer for analysis which invariably increases the number of advertisers who crave insight into the data.
  • Ride-hailing services offered by Uber and Lyft have been used by about 36% of US adults in comparison to 15% in 2015.
  • The ride-hailing service has also been used by about 51% of Americans aged between 18 to 29.
  • The opportunity in this challenge is that when drivers of companies like Uber and Lyft look for rideshare endorsement when on the lookout for passengers, it is "added to their personal auto insurance policies even though they are already covered when driving 'on the job.'"


  • As the auto insurance industry is prepping for transformation in the US due to changing human behaviors, major players from other industries are "in a unique position to disrupt the motor vehicle insurance market."
  • Tech industry big players like Apple and Google are in the mix to upset the norms with innovative insurance solutions and automated vehicles.
  • Automotive original equipment manufacturers (OEM) captive finance companies are moving outside traditional vehicle financing/leasing services to potential new services such as automotive vehicle insurance.
  • OEM captives are not new to insurance as many "have referral arrangements in which the dealership sells a car, refers the insurance business to a traditional insurance company, and receives a commission."
  • OEM captives represent a major force in the auto lending business with about 40% market share, only behind the banking industry.
  • There has been a prediction that 20% of the auto insurance market is likely to be grabbed by disruptors.
  • There is a tendency of a gradual shift in the patronage of auto insurance services from tech giants as 26% of Americans are willing to purchase from them, according to an analysis of U.S. automobile insurance.
  • This disruption by other industry players will constitute a major challenge for the automotive insurance industry within the US unless they align with modern trends that characterize human behaviors, enable customer retention, and build a structure with the necessary expertise for making informed decisions about the future.


In conducting research, we provided five current or near-future challenges and opportunities for the automotive insurance industry within the United States by examining four challenges with potential opportunities inherent in them and one major opportunity (increased accidents, thefts, and disasters).

We also ensured we covered a mix of the following: 1) consumer side (ridesharing/car-sharing services, and disruptors and modern human behavior) by providing data, survey, and statistics on opinions of Americans; 2) provider side (new and emerging technologies) by suggesting what providers consider as challenges in this evolution; and 3) regulatory issues or opportunity (monitoring and privacy concerns) by looking at the regulatory framework involved with the UBI.

From Part 02
  • "car accidents still kill more than 1.2 million people yearly."
  • "in a unique position to disrupt the motor vehicle insurance market."
  • "have referral arrangements in which the dealership sells a car, refers the insurance business to a traditional insurance company, and receives a commission."
  • "the increased use of ADAS systems and other safety measures have been slowing down the trend."
  • "there has been a spike in recent years."
  • "50% of all cars destroyed by the hurricane were from Houston, America’s fourth most populated city."
  • "about 60% of U.S.A auto insurance customers are willing to share their car’s data with the manufacturer."
  • "added to their personal auto insurance policies even though they are already covered when driving 'on the job."