The Future of Car Insurance in 2021 and Beyond

The COVID-19 pandemic overtook the year 2020 and disrupted and forever changed almost every industry. Insurance wasn’t immune from these changes, but the truth is, the insurance industry was heading for a shake-up no matter what. We are coming to an age where adult consumers grew up with computers and smartphones, and tech is no longer something reserved for younger generations. These advancements have changed the way we function as a society and how we do business.

While insurance is a robust 120-year-old industry based on policies and transactions, it was only a matter of time before modern changes would start to reshape the business. With technology taking over and a whole new generation of car owners coming to the table, change was inevitable. Here is a look forward to what the future holds for car insurance companies and car insurance policy shoppers.

The Current State Of Car Insurance

There are currently over 227 million drivers on the road in the U.S., and 87% of them have car insurance, thanks largely to the state laws. The average full-coverage policy in the US is about $1,463. While state laws only mandate liability coverage, most people will need full-coverage as it is required by financial institutions that grant car loans. Full-coverage will provide protection for yourself as well as the other party in the event you cause an accident.

Over the last decade, car insurance rates have increased by almost 30%. A handful of states, including Texas, have recently had a decrease in rates, but most areas are on the rise across the country. The rising costs come from various factors such as increased accidents, more expensive cars, and an increase in severe weather conditions.

There is an average of 6 million car accidents per year in America, resulting in as many as 90 deaths per day and millions of injuries per year. Distracted driving is quickly becoming the top reason for accidents, second only to alcohol use. A startling report by Driver Knowledge uncovered that 1 out of 3 people admit to texting while driving. You are 23 times more likely to crash your car when texting and driving at the same time. Taking your eyes off the road and your attention away from driving is seriously dangerous. This is the reason that driver behavior is linked heavily with car insurance premiums.

In 2020 a global pandemic and local shelter in place orders had people driving far less than in an average year. Many car insurance companies passed savings on to their policyholders and lowered premiums or gave cashback advantages during this challenging economic time. Assuming that things will eventually return to normal in 2021, premiums are expected to rise across the country once more.

Major Generational Shift Will Disrupt The Insurance World

For a long time now, the Boomer and Gen X generations have dominated most markets, including auto insurance. These generations have certain expectations that companies are used to and comfortable with. These older generations are used to policy-based transactions and the traditional types of insurance. The current insurance products are made with them in mind, providing a sweet spot for people between 30 and 60 years old. They have established jobs and families, and many have their credit and other financial matters under control.

In 2021, Millennials will finally surpass these older generations in market share for insurance products. Some members of Gen Z will start to turn 30 as well. These newer generations have much different expectations than previous generations. This is where you will begin to see a shift towards more personalized policies, even going so far as having ala cart and pay as you go types of insurance plans. They will demand more digital interactions and a lot more choices and variety. Using apps to conduct business will become more common, and companies that do not adapt to these changes quickly will find themselves losing customers. It is clear that insurance companies will have to adapt to new market conditions and unique consumer preferences.

Insuretech products and companies are those that mix cutting-edge technology with insurance. These companies will be very competitive for catching the attention of gen Z drivers. These companies will be focused on custom policies based on use and individual driving habits. Gen Z refers to people born between 1996 and 2015 and is the largest and most diverse generation in history. Insuretech companies are banking on the fact that gen Z enjoys less direct interaction, prefers to do business with apps, and demands a higher level of personalization.

Gen Z is almost more likely to find companies with transparent and fair pricing trustworthy. They don’t like long contracts or arbitrary rules that don’t make sense. They also see little difference between digital and traditional methods of conversation and conducting business. This means they are more comfortable with app usage than telephone calls or paperwork.

New Sources For Discovering Auto Insurance

Most consumers still use traditional methods of obtaining or changing their car insurance policies. They use insurance brokers or the internet to do their research and find the best deals. However, there is a growing desire among millennials and gen Z shoppers for options to buy insurance when they buy a car as part of a package deal. They are also interested in buying insurance from car dealers and affinity groups, and car shopping websites or insurance portals.

Besides cheap and easy car insurance, many consumers are looking for anonymity when using a website to get or compare auto insurance quotes. Giving their contact information usually results in a barrage of unwanted calls, texts, and emails. Consumers want to be able to request car insurance quotes without these disruptions.

A car insurance website like savemoneycarinsurance.com will let you get an anonymous car insurance quote quickly and easily. Getting many quotes without fear of unwanted solicitation is a massive benefit to car insurance shoppers. They know they need to comparison shop to get the best deal and just want a convenient way to do so. Younger millennials and gen Z shoppers prefer digital communication over in-person or phone calls when shopping, which is very different from the face to face meetings that the boomer generation appreciated.

In addition to websites, tech-savvy insurance companies and partners should consider apps to help people shop for and monitor insurance prices. Internet use is becoming increasingly mobile, which means apps will be more commonplace than surfing the open web.

Futuristic Auto Technology And How It Affects Car Insurance

Once thought of a science-fiction, self-driving automobiles might account for as much as 10% of car sales by the year 2035. With distracted driving causing more and more accidents, people are looking forward to self-driving cars that could have fewer accidents. While many of the first self-driving cars might be for things like transport and deliveries, you can see how limiting accidents is an exciting prospect. How will they affect insurance policies, though?

Since a consumer’s driving record is a driving factor in premiums, which increase dramatically after just one accident, this has the potential to change the amount of premiums collected by insurance companies. In fact, it could mean an estimated $25 billion loss in revenue by 2035.

Self-driving cars will most likely see a shift in accident blame from individuals to car manufacturers and have states moving towards no-fault insurance laws. You may also see new insurance categories, such as cybersecurity insurance or product liability insurance, which would cover failed sensors or other safety features.

While autonomous cars in every home might be a ways off, there are other modern safety features being used by cars right now that could change insurance costs for better or worse. While safety features have the potential to decrease premiums because of reduced risk for accidents, they also usually come in brand new cars that are more expensive and more costly to repair, which can offset the savings.

Some popular car safety technologies in use today:

• 360 Degree Vision - With the right sensors and cameras installed, you can benefit from increased visibility. Remember when we were all blown away with the back-up camera? Well, now you can see all around your car, completely eliminating blind spots.
• Facial Recognition - Some cars are using this technology to alert the driver if their attention has been pulled away from the road in front of them. This will help reduce distracted driving, especially from cell phone use.
• Lane Departure Alerts - Along with that same line of thinking, you can also be alerted if your car drifts out of your lane or over the line.
• Pedestrian Alerts - If you have a larger car, you might benefit from pedestrian alerts. Some even have infrared systems that can see in the dark.
• Adaptive Cruise Control - Cruise control is great when you are driving long stretches of road at a time, but having to adjust for other drivers constantly takes away some of the convenience. Adaptive cruise control senses the other drivers and accounts for them.
• Inter-Vehicle Communication - Some manufactures are starting to implement this via WIFI, which gives drivers a way to communicate with each other on the road.
  
  
  New Data Sources For Insurance
  
  Traditionally, insurance companies relied only on accident reports and speeding tickets to let them know how their customers driving behaviors should impact their rates. Today, they can use connected devices to record real-time data such as speed, miles that are driven, hard braking, and more. These devices have also turned consumer’s attention to the allure of premiums that change month to month based on their usage and driving data.
  
  Technology allows us to collect, organize, and analyze large amounts of data. This data mining can help insurance companies price their products and decide on new products that the market might require.
  
  Gen Z and younger millennials are more likely to openly share data with companies if they can see the value in it. In this case, sharing their data can result in saving money on car insurance.
  
  Owner Policies Vs. On-Demand Policies
  
  There is evidence suggesting that the traditional 2 car family is becoming less common, and there is a shift from single-owner cars to other on-demand types of mobility. This has a chance to significantly affect insurance companies.
  
  Modern Changes To Mobility:

• Rideshare popularity such as Uber- Especially in urban areas, Uber is becoming a popular option and alternative to car ownership or usage. Being able to summon a car on-demand has reduced the need for a family to own a second car in some cases. Working from home, COVID-19 has shown many employers that their employees can work from home, effectively freeing up office resources. As more people continue to work from home even after the pandemic is over, less time will be spent in the car commuting to and from the office.
• Urban Rental Options- Some apartment complexes and condos are offering carpools where you can check out a car for the afternoon as you would a library book. This eliminates the need to own a car for people that don’t do a lot of driving.
• Use Of Public Transport- Public perception of public transportation is changing as some areas adapt to new mass transit systems. They are increasing in popularity.
• Renting Of Bikes And Scooters- For short commutes and drives, you can sometimes check out a bicycle or motorized scooter.
• Vehicle Subscriptions- All-inclusive vehicle subscription services are a newer offering that is popular with gen Z. It allows customers to switch vehicles more often and pay a set fee that includes their car payment, maintenance, and insurance in one. You can compare this to micro-term car-sharing options such as Zipcar. You can also see a growing demand for month-to-month options or changing premiums. These changes come from emerging consumer’s desire for highly personalized service. You are seeing this today with new companies like The Root and Metro Mile. 

Can The Root Auto Insurance Save You Money?

The Root is a great example of using data collection tools to influence premiums. While The Root will still take common demographic information into consideration, what they weigh most heavily is your actual driving style. They monitor and test this with an app you can download to your phone.

The Root app will collect data such as speed, miles driven, hard braking, sharp turns, and more. You will download the app and use it while driving for several weeks before you can get your quote. After monitoring, they will either send you a quote or deny you coverage. They are very upfront with the fact that they don’t accept everyone. They do not cover high-risk drivers, which allows them to charge lower premiums.

Since they use their app for data collection and are known as a tech-driven insurance company, you can do almost all transactions through the app, including customer service and filing claims.
You can still have many popular additional insurance options, such as roadside assistance and rental car coverage. In fact, Root supplies you with a car rental while your car is being repaired to a new level by including rideshare service. They will also pay for Lyft rides on holidays where there is traditionally a lot of drinking, helping to reduce drunk driving. The Root provides additional discounts for people that don’t use their phones while driving and for owners of Tesla cars with auto-steering.

What Is MetroMile Insurance?

MetroMile is an example of an on-demand style of insurance modeled for infrequent drivers. Right now, it is only available in a handful of states but could be expanding soon. It is meant for people who drive less than 12,000 miles per year, making it good for people who work from home or live in urban areas where personal cars are used less frequently.

Using a small device called Metromile Pulse, your mileage is tracked and influences your premium that can change month-to-month. This is not the best option if you need to have a dependable budget. If you can stand a little wiggle room in your monthly expenses and you don’t drive often, you could see considerable savings. The Pulse can also help you keep track of where you parked, show you gas estimates, and keeps track of common driving routes. You will have a base rate determined by common insurance factors, but the bulk of your premium will be determined by how much you drove the previous month.

How The Gig Economy Is Impacted By Auto Insurance And Vice-Versa

The gig economy is here to stay, so we should start behaving accordingly. Reports indicate that up to 40% of American workers will be freelancers and independent contractors soon. This includes many rideshare and delivery service jobs that use personal automobiles for work.

Right now, if you work for Uber, deliver groceries for Instacart, or even deliver pizza part-time, you are not covered by traditional car insurance. In fact, in many cases, it makes you uninsurable by traditional means. Many insurers will make you get a commercial policy. Some companies like Uber might cover you under their business policy. The point is, with the gig economy being such a large part of our lives, insurance companies might be forced in the future to come up with gig-friendly policies.

What Is The Best Way To Find Cheap Auto Insurance In 2021 And Beyond?

While much of the future is shrouded in mystery and uncertainty, one thing is already clear. The best way to save on insurance is to shop around for the best rates. Again, you can do that quickly and anonymously by using www.savemoneycarinsurance.com you can also use a local broker who is an expert in auto insurance companies local to you.

You’ll keep your premiums low if you practice safe driving and avoid accidents, frivolous claims, or speeding tickets. Keep accidents from happening by using defensive driving and avoiding distractions such as cell phone use. Accidents and citations will significantly increase your premiums and could even cause you to lose your coverage of choice.

Revolutionary Changes In Other Forms Of Insurance

Changes are coming to all types of insurance companies, including auto, life, health, and home or renters insurance. Many are using new technology to become better providers and offer more choices.

Lemonade has changed its model in a way that changes perceptions of the insurance industry. They offer home and renters insurance using technology-driven means. They created a Give Back policy that returns unused premiums to a charity of choice picked by the insured. The idea is that the common good they do will create a more positive partnership between the company and the people they insure.

Insurtech companies are making huge waves in health insurance using high-tech health data collection devices, apps for a great customer experience, and AI learning for data mining. Companies like Oscar Health and Bright Health are examples of health insurance companies led by tech enhancements that lower costs to consumers. There are even insurtech companies that target corporations and their need to provide insurance to their employees with the best and most cost-effective products.
Technology and an evolving consumer base will both bring many changes to the insurance sector in 2021 and beyond. As with all types of business, being able to detect and adapt to market changes is crucial. Many of these advancements are designed to improve health and safety while providing insurance risk coverage at an affordable rate.

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