Personal lines carriers and insureds have a lot in common these days. Both are experiencing rapid societal, economic, and environmental changes that contribute to a more tense and volatile insurance market for everyone involved.    

Insureds are growing warier of insurers, mistrusting their offerings while still needing them more than ever to cover rising repair costs. Carriers are faced with more frequent and severe claims while also navigating customer demands for more flexible options, better-priced coverage, and improved convenience.   

ReSourcePro’s article Tough Times Call for New Priorities for P&C Personal Lines Carriers reports that the first and second quarters of 2023 saw the largest mid-year underwriting loss in over a decade with an almost 13% increase in auto claims costs, and the 2023 year-to-date average auto premium was up more than 10% by August of last year.    

Speed to market will be a key differentiator in insurers’ ability to deliver on customer expectations. Personal lines insurers must move swiftly to allay insureds’ concerns to stay profitable and come out on top. Insurers need flexible, agile, and modern technology that can meet and even surpass the ever-rising demands and expectations. Fast iteration and adaptation capabilities are essential, whether through partnerships, APIs, or out-of-the-box integrations.  

How to Flourish in the Current Personal Lines Insurance Market  

There’s no denying that personal lines insurers are in an uphill battle for new business, customer loyalty, and long-term profitability. But challenge fuels innovation; there are opportunities to bolster growth within the current landscape. Here are the three ways you can help your insureds — and your business — thrive:     

1. Create more streamlined digital experiences and user-focused benefits. Customer expectations [CX] have soared in the past few years," notes Elevating customer experience: A win-win for insurers and customers, a McKinsey & Company article based on a survey of over 8,500 customers of 40 North American carriers. "Noninsurers are raising the CX bar by offering personalized recommendations, omnichannel advice, and digital end-to-end journeys. As more and more companies adopt these new rules of customer engagement, why should customers expect anything less from insurers?"  
     
   Doing so benefits both insureds and insurers. According to the survey, insurers leading the way in CX can point to better results than those of competing carriers. "Compared with others, CX leaders also demonstrated stronger revenue growth (by four percentage points), stronger EBIT growth (by four percentage points), lower expense ratios (by two percentage points), and higher employee satisfaction scores." 
   
   Enhancements like digital billing can have a profound impact on customer experience and business outcomes. Business and Technology Trends, 2024: Personal Lines, a report by leading global data provider Datos Insights, notes that for one insurer, the introduction of digital billing and payments spurred a 35% increase in automatic payment adoption and a 30% decrease in payment-related calls in just eight months.
   
   Take Action: Provide convenient solutions for the end-consumer to purchase your product with as little friction as possible. Focus on providing fewer siloed solutions and improving the integration of functionalities to better serve them. You don’t have to have separate systems for agency management, document management, and portals if it’s available in one modern platform. This move will allow your organization to focus more quickly on the consumer — in lieu of juggling tech systems. 
   
   Still working through your business’s digital transformation? Consider investing in collaborations and partnerships with other like-minded businesses that are already serving your target market. A strong core system is what’s needed to integrate across the insurtech ecosystem and achieve these feats. 

2. Younger generations have a growing interest in non-traditional insurance options. J.D. Power’s 2023 U.S. Auto Insurance Study found a 26% adoption rate of usage-based insurance (UBI) among new policyholders whose insurers use telematics to price their policies. 
   
   Today’s auto customers are seeking more modern, customized risk solutions that are incorporated into their broader vehicle-owning framework, such as: 
   
   – Episodic or on-demand insurance options that allow customers to turn coverage on and off for hours, days, or months at a time 
   – Pay-as-you-drive insurance
   – More precise policy pricing based on geographic and weather-related factors, or even telematics metrics 
   
   Take Action: Organizations that focus on growth with improved digital products are more likely to quickly capture market share of younger clientele. Be creative with product development and constantly assess if your business is moving in a direction that is aligned with your customer’s interests and expectations. This may lead you to home in on niche markets and develop expertise in a specific vertical market segment.  

3. According to the 2023 Natural Catastrophe and Climate Report from Gallagher RE, 34 individual billion-dollar insurance losses in 2023 were due to global natural catastrophe events, valued at an estimated $357 billion — the fourth straight year that global nat cat losses surpassed $100 billion. This increase in claim frequency and severity from secondary catastrophes makes accurate risk and damage assessment critical. Precise assessments paint a clear picture of damage and build out tailored risk profiles reflective of true and future risk, potentially reducing costs for both insureds and carriers. 
   
   Take Action: Rising reinsurance costs create new pockets of opportunity for carriers with accurate risk pricing methods. While some carriers are opting to exclude natural catastrophes and/or not to offer coverage in certain areas altogether, other insurers can seize these opportunities by leveraging by-peril rating to identify and price more attractive risks even in areas prone to floods or wildfire. According to Datos Insights, one insurer increased new applications by more than 50% in the first six months of utilizing a new algorithm that included 12 new rating factors and two re-engineered classification dimensions.      

Modern Insurance Tech Is Up to the Challenge   

Addressing today’s obstacles isn’t easy. The important role of modern insurance technology that can rise to the occasion cannot be overstated. The sooner you have access to data in a dynamic environment, the faster you can anticipate change and respond to customer needs in a way that fosters value-driven relationships. A strong digital core and the right personal lines technology solutions allow insurers to achieve new heights they’ve only imagined before.