Insurers Eye Efficiencies and Technology as Ways to Offset Rising Premiums in 2024

Insurance Intelligence Report
December 2023

For the insurance industry, 2023 was the year of disruption. Surging rates made stakeholders re-think everything, from underwriting to carrier selection to the channels through which customers can access their policies. And with 2024 bearing down on carriers and policyholders alike, there’s bound to be much more in the way of sharp turns and quick pivots.

According to data collected by JD Power, 2024 will present plenty of new challenges and shifting trends in the insurance industry. From an evolution in the way customers shop for their policies to the way insurers service those policies, we have gleaned some key insights into what may be on the horizon for the year ahead.

Unbundling for Savings

“Bundle and save” has been a point of emphasis for carriers for years. But with premiums increasing across the board, customers are starting to uncover that decoupling their carriers may boost their savings. 

According to JD Power research, customers are increasingly interested in usage-based insurance (UBI). That interest is disrupting the decision to bundle auto and homeowners insurance, with many customers finding their best deal is to have a UBI-based auto policy and a homeowners policy with a different, lower-priced carrier. In 2023, 66% of customers with less than one year with their home insurers bundled their home and auto insurance. That’s down from 76% a year ago.

Customers with more than a year with their home insurer showed more willingness to bundle, with 77% bundling home and auto, up slightly from 76%. But with no signs of premiums slowing down, we expect UBI to play an even larger role in insurance shopping in 2024, as customers become more agnostic about their carrier willing to unbundle and price shop their coverage.

Offsetting Cost with Value

In the face of heightened emphasis on rate adequacy, insurance carriers are left with no other option but to increase premiums. But that means it’s essential that carriers show an overall value proposition for auto and home insurance policies.

For customers who either want to stick with their current carrier or who don’t find a better option, the focus shifts to reducing the costs of their policies. If the carrier hasn’t already conducted proactive outreach offering a policy review, customers will be reaching out to their agents or insurer seeking ways to mitigate their higher premiums. This presents an opportunity for carriers to highlight the existing and potential value of the policy and the advantages of being their customer. 

Strategic partnerships between insurers and other companies are one way we have seen carriers bring additional value to their offerings and we expect to see more of this moving forward. For example, starting in 2022, one carrier began partnering with a mortgage company to provide its customers savings on a home loan or refinance. Another carrier partnered with a home security company to provide their homeowners free smart home security systems, sensors, and installation as well as a reduced rate on monitoring.

Insurers are also just unlocking ways to harness the power of artificial intelligence and machine learning as well, hoping that can alter the cost-benefit equation for customers. Insurers have begun factoring in this powerful new technology into their product pricing, internal operations, sales, and servicing. Carriers who figure out how to do this quickly and effectively are positioned to reduce costs through better risk assessment, claims handling and fraud detection, while increasing sales through expanded distribution channels, acceleration and automation of the underwriting process and more personalized pricing and product offerings. Ultimately, this will improve the customer experience and give insurers more tools to provide faster responses to customer requests and issues—including initiating claims—and ease the burden on agents and contact centers. 

Digital Adoption Surges

Longer claim timeframes and rising claims costs are also putting pressure on carriers to find efficiencies in their claim operations. Loss ratios remain high after two years of double-digit increases and are forcing insurers to focus on speed, efficiency, and accuracy—buzzwords we are hearing in conversations with claims teams. The challenge here is to not lose sight of the customer experience, which is already strained by very long repair times, and digital solutions present a key opportunity. For example, in total losses, industry leaders are using tech to determine totals notably quicker and seeing positive results in both cycle time reductions and improved customer experiences. 

We’ve also seen increased usage of digital channels for claim reporting and communication and expect growth to continue. More than one-third (36%) of respondents say that they texted their insurer, while 30% have used website/apps. That makes texting the second most-popular digital method behind email (50%) and is among the most satisfying channels.

However, not everyone wants to engage in digital channels throughout every aspect of their claim so another challenge for insurers is to engage with customers in their preferred interaction channel, which is key to overall satisfaction. In fact, we find that less than one-quarter of customers want to manage their claim entirely using digital channels, but those that do have high levels of satisfaction, suggesting the tools work well for those that prefer them. But nearly 40% of customers have equal preference for both people and digital interactions, so even in this digital age, carriers will have to continue to have claim staff be available, responsive, and keep customers informed. That could prove challenging with high caseloads and longer-tailed claims continuing in the future.

An Opportunity Awaits

With their wallets taking a hit due to rate increases, customers are going to be more discerning and less brand loyal to their insurers. That means they are going to be looking for the tools and information to help them better understand their policies, the reasons for the rate increases, and what they can do to bring those costs down.

For proactive companies, that can present a golden opportunity. Insurers can both increase their customer base and boost retention by empowering their customers, whether that’s explaining their rates, alerting customers to discounts they may be eligible for, and allowing them to self-service their policies. By meeting customers where they are in 2024, insurers can find a way to earn a new level of loyalty, even amid harsh conditions. 

Find out More

This Insurance Intelligence Report is based on responses from the JD Power 2023 U.S. Insurance Shopping Study, JD Power 2023 U.S. Home Insurance Study, JD Power 2023 U.S. Auto Insurance Study, and JD Power 2023 U.S. Auto Claims Satisfaction Study. It was authored by Stephen Crewdson, senior director; Mark Garrett, director; and Breanne Armstrong, director of insurance intelligence at JD Power. Please contact us at the numbers below to connect with the team or to learn more about the underlying research.

Media Contacts
Brian Jaklitsch; East Coast; 631-584-2200; [email protected]
Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]