Carriers are using digital to offset rising premiums: J.D. Power
According J.D. Power’s Insurance Intelligence Report, the insurance industry will see a surge in digital adoption in 2024. The report, based on responses from multiple J.D. Power studies published within the past year, marked 2023 as a year of major disruption – rising premiums led to a shift in consumer shopping behavior, marketing trends and tech innovations. J.D. Power researchers indicate that, moving forward, carriers will concentrate on new technologies and digital efficiencies to combat the premium surges seen in 2023.
Inflation and loss ratios have continued to rise, resulting in lengthy claims times and increasing claims costs. This is prompting carriers to work towards more digital efficiencies in their claims operations with the goal to emphasize speed and accuracy. The report includes an example of how carriers are using tech to determine totals faster and improve customer experiences in a situation of total loss.
The industry is also employing more means for digital communications. Online channels such as using a mobile app or texting your carrier are gaining traction with insurers. Email is the most popular form of digital communication between customers and carriers, with 50% of respondents saying that they have previously used email, followed by 36% of respondents who have texted an insurer and 30% who have used an online portal via website or mobile app.
Carriers are also challenged with engaging customers through their preferred interaction channels to enhance overall satisfaction. Digital adoption presents more opportunities for efficiency, but carriers must balance it with the need to maintain a positive customer experience – especially with the state of high loss ratios and lengthy claims processes.
Responses indicate that usage-based insurance (UBI) is also gaining traction, disrupting the decision to bundle auto and homeowners insurance. The report indicates a shift; 66% of customers with less than a year with their home insurers opt for bundling their home and auto insurance, which is down from 76% a year ago. As premium prices show no signs of slowing, UBI is poised to play a more significant role in insurance shopping throughout 2024, particularly as customers show a growing willingness to unbundle and price shop for coverage.
The report notes that the emphasis on rate adequacy prompts insurers to increase premiums, making it necessary to showcase an overall value proposition for auto and home insurance policies. Proactive outreach and strategic partnerships with other companies are becoming significant avenues for carriers to highlight the existing and potential value of their policies. Partnerships like those offering savings on home loans or free smart home security systems are becoming more prevalent. Insurers are also leveraging artificial intelligence (AI) and machine learning to alter the cost-benefit equation, aiming for better risk assessment, claims handling and fraud detection.
As customers experience continual rate increases, they are becoming more discerning and less loyal to insurers. The challenge for insurers is to provide tools and information that empower customers, helping them understand policies, reasons for rate increases and ways to mitigate costs. Proactive companies can seize this opportunity to increase their customer base and boost retention by offering transparency, explaining rates, alerting customers to eligible discounts and enabling self-service options.
