According to Insuramore, a provider of marketing services focusing on the insurance sector, despite the auto (motor) insurance sector remaining a tough market, some challengers are growing profitably.
The firm’s recently published ranking for the market shows that its gross direct premiums written (GDPW ) rose to around $822.5 billion in 2021.
Progressive overtook State Farm becoming the world’s largest underwriting group in this sector, followed by China-based PICC in 3rd position, Berkshire Hathaway Insurance in 4th and Ping An in 5th.
The ranking also revealed that many groups struggled to achieve significant growth in their GDPW for this line of business in 2021; consequently, they have since suffered deteriorating profitability in the wake of higher-than-anticipated auto insurance claims inflation in 2022., Insuramore found.
Despite this, a few groups managed to report a double-digit growth during 2021. These included Sampo, who achieved this mainly thanks to its acquisition of Hastings Group; as well as Root and Skyfire, two challengers lower down the ranking, who did it through organic growth.
Insuramore said: “While US-based insurtech Root remains loss-making, Skyfire has been profitable in recent years and for the first time was ranked among the world’s top 200 groups by auto insurance GDPW in 2021 (in 173rd position).
“Belonging to First Central Group, an insurance distribution and technology enterprise active in the UK and focused principally on selling through online marketplaces (a.k.a. comparison sites), the progress of Skyfire illustrates how there is scope for competitors with an apt and genuinely differentiated proposition to take on incumbent underwriting groups even in a relatively mature and tough sector such as auto insurance.”
The firm added that, with this thought in mind, a key question for the global auto insurance market in future will be the extent to which automotive manufacturer brands may elect to participate more actively in the sector.
Traditionally, Insuramore noted, manufacturers prefer to develop branded policies underwritten by conventional insurers rather than to take on underwriting risk themselves.
Despite this, there is also a considerable interest in following Tesla’s example by also increasing their involvement in the sector. The automotive company introduced its first branded auto insurance product in the US in 2019 and began underwriting cover in selected states via its own insurance business in 2022.
Insureamore explained that Tesla is encouraged to do this thanks to its ability to harvest real-time driving data from its vehicles and by the degree to which it can embed auto insurance as part of a subscription service for its customers.
The former may help the company to assess accident risk more accurately than conventional insurers, this allows Tesla the chance to generate superior underwriting results, Insuremore highlighted. At the same time, the latter should bring about a lower churn rate, which reduces the need for insurance-specific marketing expenditure.
Insureamore added: “As other automotive brands increase their sales of connected vehicles with similar capabilities, they may also be tempted to take a fresh look at the opportunities for them in auto insurance, which could include getting involved in underwriting as well as marketing and distribution.
“Indeed, it is widely known that manufacturer branded policies tend to enjoy greater customer loyalty than the average for auto insurance in general, irrespective of how they are underwritten.”
