Market stability in car insurance increases; GEICO, Progressive expected to overtake State Farm in 2023 – Repairer Driven News

Personal car insurance continues to be a “highly concentrated” market, with the 10 largest carriers controlling 76% of the market by the end of 2021, Fitch Ratings said in its latest statement. “US Personal Lines Market Update.”

State Farm, the largest auto insurer in the US, saw no growth in its premiums, cutting its market share to 16.4% based on written premiums. However, both GEICO and Progressive “increased revenue faster than the overall market,” rising to shares of 14.7% and 14.1%, respectively.

Due to significant growth over the past three to five years, Fitch predicts that GEICO and Progressive will overtake State Farm in market share in 2023. [Progressive] recently reported rapid traffic growth,” the report, based on S&P Global Market Intelligence data, said.

The report did not provide an analysis of carriers’ changes in market share.

At the annual meeting of shareholders in May, Ajit Jain, vice chairman of insurance operations at Berkshire Hathaway, GEICO’s parent company, said that Progressive is ahead of GEICO in the use of telematics.

“There’s no doubt that Progressive has recently done a better job than GEICO … in terms of margins and growth,” Jain said, according to an Investopedia article. “There are a number of reasons behind this, but I think the main driver is GEICO … and telematics.”

Forbes reported that Jain “expects to meet with Progressive in a year or two.” And the Insurance Journal quoted Jain as saying, “Progress has been in the telematics industry for, I don’t know, more than 10 years, 20 years. GEICO until recently did not participate in telematics.” It’s only been in the last two years that we’ve put a lot of effort into using telematics in distribution and trying to match risk to risk. “

Auto insurance companies are facing a lot of losses

The combined ratio (CR), the number of dollars paid in dividends divided by the amount of income, for auto insurers fell “significantly” to 101.4% in 2021, Fitch said.

In the 2020 pandemic year, the stay-at-home order significantly reduced the number of miles driven, resulting in a CR of 92.5% for car insurance, “the best result in 25 years,” the report said.

Since then, there has been an increase in the rate of inflation and a shortage of goods, “mainly in physical damage.”

“Although the results of 2021 are expected to decrease as the driving activity and the claims return to the old traditions related to the epidemic, the CR share increased significantly by 9 points to 101% in the year,” the report said.

According to Fitch, Progressive, GEICO, Liberty Mutual, and Travelers are the only auto insurers in the top 10 to post composite ratios lower than 100 last year.

Although carriers have made changes to pricing and documentation, “correction can be slow,” Fitch said. “Legal direct damages continue to increase in auto claims, but direct damages losses were over 20 years at about 77% through the most recent three quarters of 1Q22.”

“Prices should move forward soon to match the lows expected to be above historic levels. Regulatory and political pressures in several major states, including California, may prevent a return to price levels,” the report said.

The frequency of auto claims has not returned to pre-pandemic levels, but the severity has shifted “significantly” in bodily injury, collision and bodily injury, Fitch said. It attributed the causes to “inflation, difficult procurement conditions, weak labor markets and rising legal costs.”

In particular, the physical damage sector, which is normally stable, shows “high volatility,” with CR spiking from 89% in 2020 to 104% in 2021 – “the worst sector in 20 years.”

IT trends, analytics

Advanced IT and analytics represent a way for carriers to improve operations, improve customer experience, and improve risk assessment and pricing, the study said.

Fitch said more consumers are beginning to accept the use of telematics in auto insurance, giving carriers the opportunity to “get more efficient and timely payments.”

“The pandemic has encouraged greater interaction between policyholders and insurers. Investments in technology provide continued opportunities for underwriters to improve operations and improve decision-making skills,” the study said. “The increased information and benefits give the largest auto insurers the best opportunity to leverage these investments for growth and success.”

Fitch said that having access to “uncompromised third-party data” to assess driving performance could help carriers better differentiate risks and set prices more appropriately. He said drivers’ willingness to use telematics to monitor their driving performance has increased during the pandemic, giving carriers “a lot” to use.

It also said that policyholders were “comforted” with real communication with carriers during the pandemic, although experts, such as LexisNexis, also reported that consumers are disappointed by systems that do not meet their expectations.

More information

Berkshire chairman says Progressive ahead of GEICO with telematics; GEICO sees Q1 loss

LexisNexis: Digital targets frustrate consumers; The adoption of UBI remains low


Credit: State Farm Arizona office. (Gregory Clifford/iStock)

Charts and graphs provided by Fitch Ratings

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