Auto insurers take note: driving is up, and safety is down. The two trends go hand in hand: you can't get in a crash if you're not on the road to begin with. But as people log more miles, the opportunity for collisions increases too. And boy, have people been logging more miles.
According to Property Casualty 360, national mileage reached new records in 2015, as the economy has improved and the price of gas has dropped. These twin factors helped spur a grand total of 3.2 million miles driven between July 2015 and July 2016, said the U.S. Federal Highway Administration. And according to Verisk Analytics, there's a pretty strong correlation between miles driven and an increase in damages.
How do these trends impact insurance?
The immediate result is straightforward. With accident frequency at a ten-year high, auto insurers' margins are slated to shrink in response.
This likelihood is exacerbated by another coinciding trend. The average age of light vehicles is falling. Cars used to be older: it wasn't so long ago that many people felt themselves to be in desperate straits, and at that point, if they needed a new vehicle, they made do with what they had. At this point, however, when people feel that way, more of them are inclined to replace what they're driving.
So the average car is getting newer. With collisions on the rise, this means that more of the cars that get crashed are likely to be more valuable. It's not just accident frequency that's up, in other words. It's accident severity.
There's yet one more ill-fated trend to add to this list: an increase in the likelihood of bodily injury. For the first time since the 1930s, last year, the number of deaths per 100 million miles rose. In 2015, the National Safety Council reported an 8 percent increase in road fatalities, perhaps attributable to the density of cars on the road and the prevalence of distracted driving.
Premiums are up
It's no surprise that premiums are rising in this environment. Since last year, they climbed by 5.5 percent.
There's a problem, though. It's not terribly safe to raise premiums at a time of significant industry disruption. Even if it were, the premium increases we've already seen aren't doing the job: losses are still outpacing profits.
This leaky boat won't be easy to patch. Short-term problems can be expected to rear their heads, if they haven't already – but in the long-game, there is hope. According to Verisk, insurers would do well to:
Sharpen the pencil on how much mileage they underestimate
Use predictive modeling to adjust frequency and severity estimates based on make and model
Take a close look at loss history indicators on dissatisfied (shopping) customers
Attract policyholders who show long-term potential for low losses
Allow us to help you get there. Talk to Silvervine about how to improve your efficiencies, stay afloat and win the race. We're here for you with adaptable, cutting edge insurance software, designed to help you cost-effectively compete. Request a demo today.
The FedNat Insured Web is a great tool for our insureds!
They like having a centralized location to view policy info, make payments, upload policy documents, and elect to become paperless to receive a discount.
The insureds also can file a First Notice of Loss for a claim and access exiting claim info. Silvervine recently enhanced the site which allows insureds to upload policy documents directly to their policy. The uploaded docs go directly into our workflows and save a lot of manual effort on our part.
From my visits with agents, the agents appreciate the app for the amount of time saved on having to download and attach photos directly to the policy.
The app can also reduce the amount of staff required for a busy office to fulfill underwriting requests for photos.
When training agents they are amazed at how quickly the photos attach directly to the policy. After taking photos using the app and before they make it back to their desk, the photo is already attached to the policy. They also like the ability to attach additional photos for pre-existing damage.
Customer Service is seeing an improvement with retention as the text message definitely triggers phone calls from insureds to make payments.
The insureds love the fact that we notify them on their phones because they state that sometimes they don’t receive their mail for various reasons.
The insureds are paying more attention to the texts then to their actual mail. We try to set all of our customers up on that option if we notice that they are not currently enrolled, as it builds great customer relations as well as retention.
As a company we have adopted the use of Policy Scan for all our policies, and our agents have adopted the use of the app as well.
Not only is it easy to use, there is also no more worrying about losing photos, having to store photos or photos being attached to the wrong policy.
With Policy Scan we have increased efficiency in our workflow and reduced our exposure on the risk.
Silvervine’s core administration solutions easily handles multiple carriers within multiple states, including accounting, payment processing, immediate policy issuance and endorsements.
What started out writing one product, one line in one state has now grown into mulitple products, multiple lines and writing in multiple states. We have over $95 million in annualized premium in-force and we expect to grow by 20% during the next year all serviced by Silvervine.
Silvervine was our insurance software system of choice when we started the company in 2006. Silvervine enabled us to begin business within a few months of licensing the company. Today, we are one of the top 20 homeowner’s writers in Texas and SIlvervine’s solutions have been an integral part of our success.