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Additional pressure in worker shortages is coming from other white-collar industries, which find they are all competing for the same workers when it comes to people with advanced technological skills. (Photo: 1st Footage/AdobeStock)
Insurers attempting to hold the line on premium increases are staring down a number of industry trends conspiring to undermine that resolve, according to a number of industry execs.
Supply chain woes, worker shortages, already high premiums for electric vehicles and a growing incidence of unsafe driving are all exerting pressure on the industry to raise premiums.
Observes Nathan Houdek, insurance commissioner, Wisconsin Office of the Commissioner of Insurance: “Insurance reflects the underlying cost of covered service… So supply chain issues can impact rates across multiple lines of business as insurers adjust their rates to correlate to the risk of loss…If an automobile repair shop is having to wait longer for a part and that results in a person having to use a rental car for more days, then those delays can have a cost impact.”
Here is an up-close look at the trends pressuring premiums:
Supply chain woes linger
While the nightly death tolls on the TV news chronicling the pandemic have gratefully faded into the past, the supply chain slowdown triggered by the coronavirus still looms large.
Insurance industry execs say car repair shops are still having major problems securing replacement parts for vehicles — months after the apparent victory over COVID. Even when auto repairers can snare the parts, they often find those parts are significantly more expensive.
Observes Chance McElhaney, communications director, Iowa Insurance Division, “We’ve received some complaints from consumers voicing concerns about their auto repair claims taking longer to complete than appropriate…Our investigations have confirmed in these situations, supply chain issues have been responsible for the auto parts not being available.”
Adds Troy Downing, state auditor, Montana commissioner of securities and insurance, “In many cases, repairs are not starting for up to three-to-four months due to supply chain issues.”
Christopher Bernish, VP, head of operations and IT, protective asset protection, agrees. “We have certainly seen repair timelines impacted.”
Meanwhile, auto repair shops — like virtually all industries — are finding it tough to find enough workers to fill jobs, which is adding to repair delays. The repairs miasma is further compounded by the fact that there are fewer new cars on the market; yet another symptom of the global supply chain slowdown.
That leaves more consumers hanging onto their older cars longer, putting even more pressure on repair shops to scramble for parts when they show up for a makeover.
Equally worrisome: Longer waits for repairs are also forcing consumers to drive replacement rental cars longer than usual. That particular challenge has created a separate headache for insurers, who must choose between footing the bill for more days on rental cars than normally anticipated or leaving customers in the lurch without a rental car — and perhaps alienating them for life.
Katha Treanor, communications manager, Virginia State Corporation Commission, says many insurers in her state are picking up the costs for additional days on rental cars.
“We have noted insurers are paying for additional rental days — especially on third-party liability claims,” she says.
However, Jeff Rude, insurance commissioner, Western Zone Wyoming Insurance Department, says in his state, consumers are not as lucky. He shares that consumers are the ones stuck with the bill when the official rental car cost reimbursement agreement in their insurance policy hits the limit.
Yet another challenge: The increased costs for car parts, car repairs and replacement rental cars are also driving up the overall cost of salvaging a car after a major accident. The result is more cars suffering major damage are simply being written off by insurers as a total loss in light of those inflated charges — often to the consternation of consumers.
Worker shortages add to industry woes
Meanwhile, insurers have found that the worker shortage plaguing so many industries has shown up in their sector.
Observes Mike Causey, commissioner of insurance, North Carolina Department of Insurance: “Many insurance companies have done away with their adjusters and are depending on outside adjusters.”
The dearth of workers was triggered in part by the ‘great resignation’ of workers, which is being experienced across virtually all industries. In addition, a significant percentage of older workers looking at future unknown risks associated with the coronavirus are simply checking out early from work life rather than risk their health in uncertain times.
Additional pressure in worker shortages is coming from other white-collar industries, which find they are all competing for the same workers when it comes to people with advanced technological skills.
Observes Wisconsin’s Houdek, “In the financial services space, (insurers) face aggressive competition to recruit and retain qualified and talented staff…As the use of technology has increased, insurers are also competing with the tech sector to find experienced developers, computer scientists and experts in AI.”
The upshot these stressors are exerting on the day-to-day operations of insurers: Fewer workers on hand means it sometimes takes longer than usual to process claims.
Additionally, the exodus of older workers is leaving some insurers with an experience and perspective gap. In some cases, there are fewer ‘old hands’ on board at some insurers to help guide new recruits through tricky or unusual claims.
Montana’s Downing adds, “There has been a shift in the experience and knowledge levels of adjusters due to skilled claims professionals retiring or leaving the workforce.”
Janet Ruiz, CPCU, AIM, director, strategic communications, Insurance Information Institute, believes that despite challenges, the industry has been able to respond to the worker shortage with a combination of technology and aggressive hiring.
“Insurers have increased their use of technology to streamline the claims process,” and help lighten staffer workload, Ruiz says. “Insurtech continues to provide cutting-edge solutions to the claims process and improved customer experience throughout.”
Despite competition from other white-collar industries, insurers have found ways to bring more tech-savvy workers on board, according to Ruiz.
Those workers have broader skills and education and are “able to integrate the use of digital platforms, artificial intelligence, workflow process, project management, etc. into the insurance claims process,” Ruiz says.
Wyoming’s Rude is another big believer in using technology to solve the worker shortage problem. Specific tech moves Rude believes hold the most promise for the industry are wider adoption of apps that monitor driving behavior, increased use of drones that assess damage and overall increased use of software in underwriting.
Electric vehicles: More environmentally friendly, but at a cost
Meanwhile, insurers are also finding that electric vehicles are putting upward pressure on premiums, given that as a vehicle genre, EVs are much more costly to insure and repair than their traditional counterparts.
For example, EVs tend to throw nearly twice as many fault codes as gas-guzzlers due to their heavier reliance on their electrical system and related components.
Since systems in an EV are much more tightly interdependent than in traditional vehicles, an EV experiencing a collision may often have more systems simultaneously impacted by that accident than a traditional car.
Case in point: Many EV owners in Florida saw some especially heavy losses after hurricanes there during the 2022 season wreaked havoc on their vehicles’ electrical systems.
Observes Montana’s Downing: “CSI’s Insurance Consumer Services division reports that hourly body shop rates are approximately 50% higher for electric cars due to the manufacturer’s required standards and access to certified technicians. When it comes to electronics in general as it relates to even traditional vehicles, additional wiring is added to the body of the vehicle — for example under the carpets, in doors, etc., as vehicles become ‘smarter’…When these vehicles experience significant water damage, they are also often totaled due to the risk of fire associated with wiring.”
III’s Ruiz believes EV manufacturers need to take the lead in bringing down the relatively high costs of repair for their vehicles.
North Carolina’s Causey has a different perspective: “My opinion is the local, state and national leaders need to move away from forcing electric vehicles on the public. If people want to buy electric vehicles that should be their choice. We could become an energy-independent nation if they would dig for more oil…The cost for an electric bus is three or four times that of a regular vehicle because of the high cost of batteries. I favor gas-powered vehicles over electric vehicles. We simply don’t have the infrastructure to support electric vehicles at the time.”
Drivers not as careful
As if these uncontrollable market forces are not enough for insurers to deal with in their drive to keep down premiums, another new pressure point — an increasing number of drivers who are simply not as careful as they used to be — could be easily solved if some people were simply more responsible.
Spikes in unsafe driving are up across-the-board, according to North Carolina’s Causey.
Drivers are speeding more than has been typical in recent years and they’re driving under the influence more, despite decades of campaigns by groups like Mothers Against Drunk Driving.
Even worse, more drivers are getting on the road without wearing seatbelts and are also driving in greater numbers while distracted — with smartphones and texting as the primary culprits.
Joe Dysart (joe@breakingnewsintech.com) is an internet speaker and business consultant based in Manhattan.
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