Visualize: Insights that power innovation

Where is the personal auto market, and how did we get there?

By Jason Polayes  |  October 15, 2018

A few generations ago, it took some time to produce an auto insurance quote, but it was usually reliable. Today, under growing pressure from tighter margins and drastically lower conversion rates, many insurers may base the first quote on partial data that doesn’t generate the final rate—and manages to frustrate the customer.

This experience runs counter to trends that are transforming insurance as we know it:

Lightspeed Auto graphic

With every minute that passes, new business opportunities slip away

  • A typical online auto quote can involve 10 to 35 questions and take 7 to 20 minutes to complete.11
  • Thirty percent or more of prospects never make it through the sales funnel.12
  • Another third is uprated after the initial quote13, leading to lost business and damaged loyalty.14

Some insurers use prefill data, but the process may still be considered slow and intrusive. Minute by minute, new business opportunities slip away. To get past this unhealthy state, it’s important to understand the history of how we got here.

The right call?

Many insurers control expenses through a strategy that leads to a series of quoted prices. Rate Call 1, the initial rate quoted by an insurer, often involves little data beyond what the applicant supplies and very little validation. The applicant may logically expect to pay this price after receiving the initial quote.

Then comes Rate Call 2. This quoted rate is often different and likely higher than the original quote, based on additional data obtained after the customer shows sufficient interest in a potential purchase. It’s also frequently an unpleasant surprise.

To be fair, insurers 50 years ago enjoyed greater sales success in a less competitive environment than today, when typical quote-to-bind ratios are now 25 percent and conversion (close) rates can be as low as 1 percent through comparative raters. The worse these metrics, the more acquisition costs per-policy. The winners are typically insurers that perform best by these measures.

Last century’s insurers also had far less data to sift through in setting rates and had lower transactional expenses to consider when giving a quote that might not even become a finalized policy.

Breaking away

The current state can feel like an inescapable reality for insurers that now take customers through two, three, or even more rate calls. But a new white paper from Verisk will present a world in which Rate Call 2 may no longer be necessary.

This paper explores several key issues, including:

  • how insurers became vulnerable to InsurTech competition
  • how technology platforms are enabling a new, viable economic model
  • how early adopters of the one-rate auto insurance acquisition strategy—providing a single, accurate quote up front—will gain significant competitive advantages

1. U.S. Census, 2018. 2. J.D. Power & Associates’ Power Information Network, 2017. 3. National Association of Realtors, Home Buyer and Seller Generational Trends, 2018. 4. Information Research Center, Digitizing the Auto Insurance Customer Relationship, 2018. 5. Nielsen Scarborough Survey, 2017, the number of consumers shopping online for insurance during the past 12 months grew by more than 11 million over the past five years. 6. Assured Research, Hard Market for Private Passenger Auto is Over, 2018; two-thirds of auto policyholders experienced flat or declining rates. 7. Verisk analysis of AM Best, 2013-2017, market share gains measured as a minimum increase of one-twentieth of one percentage point, or a difference of roughly $100 million 2017 premium dollars. 8. Verisk, The Challenge of Auto Insurance Premium Leakage, 2017. 9. J.D. Power calculations based on S&P Global Market Intelligence Platform. 10. CB Insights data, aggregate insurance venture capital funding total between 2011 and Q3 2018. 11. Verisk client experience. 12. Ibid. 13. Ibid. 14. Mulesoft, Consumer Connected Insights Report, 2018.


Jason Polayes is a senior product manager at ISO. You can contact him at Jason.Polayes@verisk.com.

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