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9 likely new-normal scenarios for personal auto insurance

This is the second in a series of articles that consider trends, predictions, and strategies for personal auto insurance leaders to compete in the “new normal”. Learn more when you view our on-demand webinar.

As personal auto insurers navigate through and beyond the coronavirus recession, complex social and economic trends appear likely to shape the “new normal” operating environment, testing companies’ ability to adapt. Multiple scenarios appear likely as the market seeks equilibrium, based on Verisk data, observations to date, and expert analysis. Here are nine to watch:

  1. Market contracts: As much as 5 percent of premium—some $13 billion—has already been returned in 2020, with a second round of refunds and rebates likely to take even more off the top line. Meanwhile, some consumers in financial distress are reportedly downsizing or dropping coverage as they garage some vehicles. Some may simply fail to make payments and drive uninsured.1

  2. Severity worsens: The dramatic drop in miles driven means emptier roads and potentially greater temptation for the remaining drivers to speed and risk more severe accidents. Cost of repairs may rise, as repair shops may struggle amid pandemic-related disruptions and restrictions, while supply shortages drive up the cost of needed replacement parts.

  3. Disciplined spend: Insurers are likely to scrutinize processes, operations, and contracts with an eye toward expense reduction and risk management to compensate for the top-line effects of the recession. Readiness to adapt for uncertainty may become a higher priority.

  4. Sharper focus on usage: In the aftermath of pandemic lockdowns that curtailed miles driven, and with surging unemployment and the potential for longer-term trends toward more remote work, interest in usage-based insurance (UBI) or pay-per-mile programs is more likely to spike. Regulators seeking to promote consumer-friendly insurance programs may welcome any shift by insurers in this direction.

  5. Struggling consumers pressure top line: If higher unemployment persists and personal income continues to decline in the current recession, insurers could see even more nonpayment of premiums, policy lapses, increased deductibles, and reduced coverages. Secondary vehicles may be sidelined and new-car purchases postponed.

  6. Extreme price competition: Assuming lower claims frequency outweighs the effect of higher severity, insurers could be left with higher surplus and thus more latitude to pursue growth through competitive pricing. Financially stressed consumers may amplify this trend as they become more price-sensitive, pushing insurers into a soft market of uncertain duration.

  7. Historic drop in mileage: As noted above, higher unemployment and increasing remote work are driving miles driven downward. Growth in online shopping may amplify the mileage trend as these factors may likely outweigh the contrary effects from lower fuel prices, a preference for driving rather than flying, and less use of public transportation due to perceived infection risk.

  8. Accelerating digital investment: As insurers settle into the new normal and refocus on strategic initiatives, likely points of emphasis include broad application of digital tools to streamline and personalize customer experiences, enable the sales force in new ways, and upgrade processing capabilities.

  9. Workforce transformation: With traditional office work upended by the coronavirus, insurers are likely to explore more flexible working arrangements that employ collaborative technologies. Outsourcing functions and diversifying distribution may become more attractive, and expanded communication channels could be vital to connecting a less centralized workforce.

Agility for the unexpected

While the coronavirus pandemic has been intensely disruptive in itself, other social, economic, business, and political influences may have further impacts on the operating environment for insurers.  Great changes can happen in what feels like an instant and move the ground under insurers, challenging them to keep their footing.

A future article in this series will explore strategies to complete in the new normal, with specific application to the likely scenarios listed above.

Visit our website to explore more strategies for the "new normal" in personal lines insurance.


  1. Verisk estimate, based on Lyle Adriano, “Insurers offering $10.5 billion in rebates – but who is offering what?”, Insurance Information Institute, April 13, 2020. <>, accessed on June 2, 2020; and Faris Khan, “State Farm More Than Doubles Its Auto Premium Relief Effort,” P&C Specialist, May 18, 2020. <>, accessed on June 2, 2020.

Jared Smollik

Jared Smollik is vice president, personal lines core products at Verisk. He can be reached at

Raul Retian

Raul Retian is senior director of ISO Personal Lines Core Products. He can be reached at

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