Price equilibrium is returning to the car insurance market after new price walking rules pushed premiums up by 4.9% in January 2022, according to market research firm Consumer Intelligence. 

The analysis, which reviewed average insurance premium movements across the four biggest price comparison websites as well as key direct insurers, further showed that in the last three months average premiums have risen 6.2% for over-50s, with motorists aged 25 to 49 also seeing an increase of 4.1%. Drivers’ under-25, however, recorded price falls of 2.3%.

Around 30% of the five cheapest insurance quotes now come from telematics firms, compared to 28% earlier this year. 

Isobel Rafferty20 April 2022 in Insurance Times

Nevertheless, the UK like other markets faces inflation in costs and upwards pressures on pricing policy. 

From LexisNexis Research : -

There’s a perfect storm brewing in the auto insurance inseachdustry, with the potential to create havoc in the industry as a whole and the claims function in particular. This could result in long-lasting negative impacts for your business—including increased costs, reduced margins and most of all unhappy customers. What has triggered this perfect storm?

1. Rapid inflation of up to 7.5% is driving up costs and threatening margins for claims filed under policies priced at lower inflation levels.
2. The Great Resignation is creating churn in the workforce. Claims call centers are losing as many as 30-35% of their employees. Body shops are impacted, as well.
3. Supply chain issues are driving up average days to repair because parts aren’t being delivered promptly.

Your customers want their claims settled easily, promptly and accurately—no excuses. You want to delight your customers and for your business to be profitable. To achieve these goals, you must face the perfect storm head on with data-driven automated solutions.

ERS add in the war in Ukraine and the impact of Brexit.

However, Brexit, pandemic-induced disruption, and, most lately, manufacturing problems due to the escalating crisis in Ukraine, are taking their toll on a repair industry already stretched to capacity by supply chain issues – creating new challenges for motor insurers, brokers and customers alike. The entire industry is affected. 

The industry’s reliance on overseas parts is putting massive pressure on garages, car manufacturers, and the customers , who are having to wait longer than usual for their cars to be fixed.

One reason for this is that two-thirds of vehicle parts are manufactured in the Middle East and China, where Covid-19 continues to affect production. And with Ukraine and Russia both critical for the production of semi-conductors, global manufacturing issues won’t be resolved any time soon.

Parts delivery delays:

The average UK parts dealer holds just 1.5 days’ worth of stock, with the industry operating to just-in-time supply lines from the EU. These parts are taking longer to come through from the dealer network due to Covid-19 backlogs, sickness leave, and the general shortage of HGV drivers across Europe.

According to the National Body Repair Association (NBRA), the number of parts available with short lead times has dropped by 30%, with almost one quarter of all jobs now taking over a week for parts to arrive – delays that are only anticipated to get longer.

Repairer constraints, capacity issues and rising prices:

The NBRA estimates that approximately 100,000 damaged vehicles are waiting to be brought in for repairs, while driveable vehicles are taking five weeks longer to get booked in than pre-pandemic.

Inevitably, parts costs have increased due to a combination of supply chain problems, import-related and pandemic-induced delays, dealers holding less stock, and new car parts production being prioritised over parts for existing vehicles. We have seen some bodyshop consolidation in the market and it’s reasonable to assume that there will be further reductions in repair capacity as a consequence.

Labour shortages:

Like many other industries, bodyshops have seen reductions in their workforce as people make different lifestyle and career decision following Brexit and Covid. At the same time, the pandemic had reduced the overall pool of talent available. The industry is taking steps to produce a more sustainable pipeline of talent, but in the short term there will be a shortage of people to undertake the work.

North American, UK and mainland European not to mention APAC insurers are facing these pressures head-on.

ERS action to tackle these issues include: 

At the first point of contact, our customer service teams are helping to set customer expectations about repair timeframes and courtesy car availability, while prioritising undriveable vehicles to help ensure customers are not kept off the road altogether.

We have enhanced our mobile repair offering to provide wider network coverage and to identify appropriate cases at new claim notification stage.

And we are offering the customer the choice of fitting non-OEM or green parts to get their vehicles back in the road more quickly.

We’ve allocated dedicated resources to support our supply chain and track emerging issues so we can predict further challenges before they occur. Similarly, we’re monitoring repairer capacity daily to ensure that customers are directed to repairers ready to take on their vehicles.

LexisNexis naturally offers technology solutions to help automate simple claims and free up claims adjusters to manage complexity and provide the human empathy when clients need it. Its four key ways to weather the storm are: 

1. Offer simple, seamless experiences enabled by customer-friendly digital interactions. User-friendly, self-service applications make it easy for your customers to file a simple claim and see it through to conclusion, while freeing adjusters to focus on more complex claims.
2. Accelerate processing with data prefill. You can shave days off of processing time, improve accuracy and keep your customers happy using solutions that auto-populate claims forms with the rich data now available in the insurance ecosystem.
3. Automate to streamline the workflow. When you embed data and analytics into your workflows, you can confidently automate as much as 90% of your simple, non-injury claims—speeding up settlement, freeing up resources and pleasing customers.
4. Provide the human touch when needed. Your customers appreciate the convenience and time-savings of digital interactions, but sometimes they want to talk to a real person. The more strategically you use automation, the more you can free up agents for more critical tasks, such as providing human interaction when that’s what your customers want.

Communication is also at the heart of both approaches combining automated digital alerts, the use of a customers favourite apps like WhatsApp, and real person-to-person conversations. Setting expectations early, prioritising claims and triaging to the right claims teams and supply chain partners. 

There are many technology partners able to help insurers personalise and customise claims journeys from simple accidental damage to complex claims involving third-party liability, personal injury and affected property claims. Whoever you choose you cannot escape the need to plan from the customer backwards rather than just chose to automate to reduce costs and speed up settlement. The supply chain issues that ERS highlight mean that management of all the links in the repair of vehicles needs to be tackled not to mention commercial fleet insurance where brokers are a key aspect of the chain.

It's no good speeding up eNOL and FNOL only to hot the buffers of waiting for parts to arrive and delaying repairs. Communication throughout is key to keeping customers involved and offering options like non-OEM, recycled and green parts wen available. 

Its more than digital transformation- its auto claims transformation in which technology is a means to an end. Ad where the technology partner can help in planning strategies, business models and the new products and services customers demand from embedded insurance to UBI and short-term auto rental.

Its no good trying to be agile and spread you wings unless you can transform from a slow moving chrysalis to a free-ranging butterfly. Read more at Everyone wants to be a beautiful butterfly 

 Digital Claims Management Platforms

It is telling that whilst all core technology platforms feature a claims module most customers license a separate digital claims platform. With circa 70% of an insurer’s cashflow tied up in claims operations and claims a key determinate of customer satisfaction and retention you can draw your own lesson.

Options including Claims Ecosystems Providers e.g. Verisk band LexisNexis and what you might term Claims CoreTech i.e., modern architecture, cloud native, public hosted, micro-services and API architected with low-code/zero-code standard. Examples include RightIndem and Snapsheet.

Some technology partners specialise e.g., CoreLogic and Synergy with property, home and contents whilst others cover multiple lines of business e.g. Verisk, 360Globalnet and RightIndem.

Do you put all your trust in a cloud-native, micro-services and API driven platform that has a limited number of customers, scaled only to modest claims volumes and may have shown focus in only one or two lines of business?

Or do you choose a proven new legacy option that has scaled across many large Tier 1 and Tier 2 insurers but has an amount of technical debt hidden in the various modules and tends to be expensive, more complex to deploy and require major upgrades every three/four years?

Luckily a number of digital claim management platforms have scaled up and can offer proven ability to deal with millions of claims per annum. And scale up from just thousands to high volume at a rate to match your own capabilities. That make it easier to prove the technology in one line of business and once the technology and relationship is trusted expand over the whole business. 

You will require assurance that each platform can integrate with core third party software to build out the functionality, digital UX and claims journey required for all lines of business. Many vendors talk of their API documentation and ability to integrate but some lack the stamina and inhouse resources to fulfil the promise. You will need these third-party applications, so it is best to validate the capabilities of the vendor before committing to trials or POCs.

There are pros and cons for either choice and key is the trust you feel you can place in the people involved and relationships with each vendor. Geoffrey Moore is an outstanding advisor on the technology adoption lifecycle and on technology start-ups achieving scale. He emphasises that founders and managers of start-ups are often not the ones suitable to take innovators beyond the first few customers.

A recent research project by Sonr in partnership with EY rates Insurtechs by a number of characteristics including the capabilities of the people involved. The result is the Insurtech 100 Report ( see Further Reading at end of the article).

What range of options do you have?

Ecosystem Claims Management Platforms

• Verisk for property and auto

New Claimstech Management Platforms

• 360SiteView
• Claims Genius
• Claim Technology
• RightIndem
• Salesforce Industries (Insurance)
• Snapsheet
• Synergy Cloud

No one platform will have everything an insurer, broker, MGA requires. You will need to add third-party solutions to deliver all the requirements an insurer, broker, MGA will demand.  Whilst all vendors claim to have large API libraries and integration capabilities many will lack the resources and commitment to be able to connect the required mix of third-party apps and data sources.

Point Solution Software

Policy Admin, Claims Validation and Triage

• Iotatach
• Sprout.ai
• World Programming InClaim

Claims Damage and Cost Estimation (often combinations of these)

• Be Valued
• CCC
• Claims Genius
• ClickIns
• LexisNexis
• Mitchell
• SLVRCD
• Solera/Audatex
• Symbility (CoreLogic)
• Tractable
• Value Checker
• Verisk
• Xtract360

Liability Assessment

• BAIL

Counter Fraud

• 360Retrieve
• BAE NetReveal
• Shift
• World Programming InClaim

We have  talked about auto claims but unless an auto insurer can anticipate competition from auto OEMs, new full-stack insurers, the growth of embedded and UBI  insurance powered by telematics it faces relative decline over time. 

I wrote a whole article on core systems and the constraints from systems designed a decade ago. Even though they are being squeezed onto the cloud they are still old technology unable to really deliver the dynamic ecosystem models vital for the future. New entrants like EIS, ICE and Genasys are challenging the status quo. 

The LexisNexis article opens up a Pandora's Box of opportunity and challenge. Best to think it through very carefully.

Further Reading

Creating value, finding focus and choosing the right insurtech partners

"Tesla, Other Car Makers Have Edge Over Incumbent Auto Insurers: Moody’s" Or do they?

Briefing: ‘Great shame’ that brokers are not more involved in claims process

The best insurance claims process for the digital world

How we’re responding to unprecedented challenges across the claims and repair landscape

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