To equip insurers with a deeper understanding of these key trends, TransUnion conducted a survey of 2,761 U.S. consumers with active auto, homeowners, renters and/or life insurance policies during November 2021. The findings highlight consumer attitudes towards online insurance shopping, auto and property telematics—which involve devices that monitor and report on driving behaviors or property hazard conditions—and more.
“Our analysis of the past year’s trends as well as findings from the consumer survey suggest the insurance industry has a couple key challenges to address,” said Mark McElroy, executive vice president and head of TransUnion’s insurance business. “On one hand the insurance industry will need to meet the increased demands for digital processes. On the other, it must educate the public and ease concerns over the use of credit-based insurance scores and externally-sourced data, which are helping to drive that demand.”
Consumers increasingly seek a digital experience
The largest group of survey respondents comprised life insurance and personal lines property and auto insurance consumers. One of the most important findings from that group was that they prefer digital channels, like email and mobile apps, for requesting a quote, asking a question, or discussing a policy.
The combined averages of those who prefer email (29%) and those who prefer an insurer’s mobile app or website (23%) show that more than half (52%) prefer a digital channel. What’s more, the average percent of consumers who indicated an insurer’s mobile app or website portal as their preferred communication channel represented a 28% increase from last year’s survey.
Increased use of online channels will have several implications across the industry. For example, insurers will be expected to create seamless and secure digital experiences for consumers at every stage of the policy lifecycle. Many carriers will also need to reevaluate their channel mix and decide whether to adjust their sales strategy to better utilize direct-to-consumer sales websites and apps that help bridge the gap between consumers and agents.
Compared to the rate of consumer adoption of these technologies, commercial insurance’s digital transformation lags. However, this sector appears to be in the early stages of climbing the same steep curve.
“An opportunity for digitization in commercial lines is to leverage the underutilized third-party data that can autofill much of the information about corporate real estate or vehicle assets that customers are expected to enter manually on an application,” said McElroy. “The current manual process also places the burden of verifying this information on insurers, making automation a win for both parties.”
Continued digitization dependent on demonstrating fairness
The continued shift to digitized, accelerated underwriting is driven largely by access to credit-based insurance scores (CBIS) and other third-party data. However, in more recent years, the use of CBIS in the insurance underwriting process has come under scrutiny by certain consumer advocacy groups and regulators. Providing evidence that the practice has expanded the availability of insurance in many cases and often works to the advantage of consumers across all risk segments will be necessary to demonstrating that CBIS is a critical element in the overall insurance underwriting process.
For example, the report explains that expanded use of accelerated and data-driven underwriting has often reduced prices for customers with good risk scores who may have otherwise been unfairly disadvantaged due to being renters instead of home owners.
In the commercial housing insurance sector, aggregated credit-based scoring of tenants can lower the insurance rates paid by landlords, who might otherwise have their policy priced solely on a building’s location and age. This savings, in turn, can allow landlords to lower rent, potentially creating more affordable housing for consumers.
Telematics are proving popular with auto insurance consumers
This year’s consumer survey also found 32% of respondents said they had been presented with a telematics option for their auto insurance policy. Such programs can use connected devices, mobile phones or auto manufacturer car apps to monitor and report detailed driving behavior, and 49% said they opted in to the program.
Insurance rates decreased for nearly half (48%) of those enrolled in a telematics program, while staying the same for 30%. Overall, nearly two-thirds of consumers (64%) were “very satisfied” or “extremely satisfied” with their telematics experience, and 26% were “neutral.” In line with satisfaction rates, 64% said they are still using their telematics program.
Similarly, commercial insurance presents a significant opportunity for telematics as many business owners may be more open to installing such tools in corporate vehicles in order to encourage employees to drive more safely.
However, homeowners appeared less open to using connected devices to monitor their house or condo for warning of fires, flooding and other hazard risks. When asked whether they would allow an insurer to install and monitor such a device in their home, only 33% of respondents said they would, while 26% were undecided.
“The hesitance from consumers to adopt auto and home connected devices was an interesting finding,” said McElroy. “I suspect this was driven by concerns over privacy, which means insurers will need to convince consumers that telematics is about monitoring driving behaviors and the condition of home appliances, like water heaters and furnaces, to ensure people’s safety—not gathering their personal information.”
Please click here to download a full version of the TransUnion 2022 Insurance Trends and Outlook Report.
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