Peter Vitale On COVID-19’s Impact On The Auto Insurance Industry

Few things are the same as they were at the beginning of 2020, and that includes the auto insurance industry. The COVID-19 pandemic has made most insurance agencies reexamine how they deal with their customers and streamline their businesses. As a Michigan-based insurance consultant, Peter Vitale works with small independent agency owners regularly. They’ve shared their experiences over the last year or so with him, rendering Vitale particularly able to speak on this topic. Here’s what he had to say about the pandemic, the auto insurance industry, and evolving customer service:

Ways the pandemic has changed the auto insurance industry (the good, the bad and the simply unusual)

To say that the last year or so has been unusual would be an understatement. There is no industry that hasn’t felt the impact of the COVID-19 pandemic. The auto insurance business is no exception. Some of the changes in the industry could have been foreseen; however, many came out of left field. Here’s Peter Vitale’s assessment of the changes we’ve seen in the auto insurance business since the pandemic began.

1. A more competitive marketplace.

A study by JD Powers found that while consumers were driving 55 percent fewer miles and the US unemployment rate touched 15 percent in 2020, auto insurance policyholders were shopping around in record numbers. They also found that while companies have been working to differentiate themselves from other auto insurance companies, consumers see the difference as primarily price. That’s not good news for auto insurers. Competing solely on price is never a good idea, since there’s always a company willing to reduce their price until no one is making any money.

2. More attention to customer service.

As consumers have become more inclined to shop around for their auto insurance and as the economy has become more competitive, insurance agencies that sell auto insurance have been forced to pivot and look more closely at their customer service efforts. Savvy agents and insurance executives, like Peter Vitale, are looking at ways to make the process of buying an auto insurance policy easier. For example, as an agent, you may already have a lot of information about your customers. Why make them answer the same questions over and over again? Of course, insurance professionals need to reassure customers that their personal information will remain confidential.

3. A good deed unrewarded.

Auto insurance carriers returned an unprecedented $18 billion in auto insurance premiums (that’s about seven percent of total industry premiums) to consumers in 2020 because people were driving many fewer miles. However, less than half of the auto-buying public was aware of this move, according to the JD Power study.

4. Fewer, but worse drivers

While America’s roads were almost empty during most of 2020, the drivers who were on the road were more reckless. A LexisNexis Auto Insurance Trends Report found that accidents as a result of high speeds increased by 10 percent from 2019, for the period from mid-March through the end of the year. In addition, DUI arrests among younger drivers increased by a whopping 50 percent from the previous year during the period from Mid-March through the end of April, 2020, and collision severity increased by 3.7 percent year-over-year increase in 2020.

5. Creative auto policies

By-the-mile auto insurance policies became more attractive in 2020, as policyholders were garaging their vehicles and working from home. For example, Liberty Mutual offers a “ByMile” policy where drivers pay a small, fixed monthly fee plus a per mile fee (with a cap at 150 daily, so that road trips don’t become ridiculously expensive). The company claims that policyholders saved between 25 and 40 percent on their premiums, as compared to a traditional policy, even before the pandemic began.

What do these trends mean for the future?

The next few years will likely be challenging for auto insurance companies and agents who sell auto insurance. However, the good news is that the auto insurance industry is generally much less affected by economic downturns (and upturns) than other segments of the insurance industry. That gives auto insurance agencies somewhat of a solid foundation on which to build their future.

Perhaps the biggest opportunity for agents and agency owners is to build on the customer service strides they’ve made in the past year or so. After a dialogue has been established with customers, it’s going to be easier to continue interacting with them. Now is definitely not the time to relax communication and outreach efforts.

This post-pandemic period is also a good time for agents to make good use of social media. Facebook, Twitter and other social media platforms are excellent places to communicate new customer-based services and industry changes. These platforms are also a good place to gauge customers’ reaction to new products and services. Make sure to monitor posts regularly, however. No one likes a one-sided conversation.

There is also an opportunity for agents who are open to new products, such as auto policies driven by telematics that monitor a policyholder’s driving skills or by-the-mile policies. Instead of waiting for customers to ask for these products, offer them to customers who could most benefit from them.

About Peter Vitale

Michigan’s Peter Vitale has spent more than a decade in the auto insurance business. He has been a successful agent and the owner of an award-winning Allstate independent agency. Today, he is an insurance consultant, helping small and medium-sized independent insurance agencies be successful. Peter Vitale also owns the Bloomfield Insurance Group in Bloomfield Hills, Michigan. Vitale graduated from Michigan’s Oakland University with a Bachelor of Business Administration degree and still lives in the Oakland County community where he grew up. When he’s not working, he’s actively involved in community affairs and sits on the Board of the Eastern Michigan Better Business Bureau.

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