2023 Challenges and Opportunities for Auto Insurance Agents
As we advance into the second half of 2023, we continue to see the ripple effects of increased inflation and supply chain issues from 2022 which has delivered the U.S. private auto insurance industry’s worst ever performing year.
According to an Insurance Journal article written in May, “the motor vehicle insurance consumer price index soared by 15.5% year-over-year in April — more than three times the overall CPI, and the highest such increase since 1977, when adjusting for the one-time impact of COVID-19 premium rebates.”
Also of note, rising premiums were not enough to off-set rising losses over the last year. Losses incurred for physical damage and combined liability lines both increased by over 23%, year-over-year in 2022, while net premiums earned only increased by 6.4% and 3.4%. Experts attribute the rise in auto claims to the return to the roads post-pandemic, and rising parts costs.
Without the abatement of loss pressure on our carrier partners’ underwriting margins, we will continue to see this tightening and contracting until sometime in 2024.
So, what does this mean for independent agents?
Continued restrictions from the carriers will mean several things for independent agents across the industry:
- Continued deceleration of new company appointments
- Carriers looking for agencies that are bringing value
- Companies tightening qualifications regarding low production, high Loss Ratios, bad retention, and poor quality of business (low limits, credit, prior insurance)
- More rate increases and tightening of class codes
- More book audits
- Carriers continuing to focus on profitability over new business growth
However, even with these changes and challenges, the industry is seeing a continued shift toward the independent agency model.
Despite growing competition from online and direct channels, the independent agency model is gaining market share. The Big “I” 2022 Market Share Report2 shows that independent agencies captured 62% of all property casualty insurance written in the U.S. and 88% of all commercial lines premiums.
Consumer uncertainty, rising rates, and restructuring of policies is shifting customer focus to trusted advisors, to help them navigate these changes. Independent agents are doing well because they can serve their clients better. Period. With rising premiums, many consumers want someone who can provide better rates and more customized solutions.
So, in many ways, independent agencies are much better positioned to be competitive and grow in the current market situation.
What you can do to succeed in this market?
We will continue to work with all agencies to help you navigate new carrier guidelines and policies as they shift to accommodate the market.
Continue to prepare your clients for rate increases and changes coming to their policies. Use the arsenal of market and product options that Smart Choice can provide you to keep the changes to customers’ policies as minimal as possible. You should remain in contact and regularly engage with your company reps to make sure you’re writing quality and desirable business.
Make sure you’re taking advantage of national incentives, bonus opportunities and contests exclusively available to you through Smart Choice’s carrier partners, in order to maximize your revenue.
Our primary objective remains to help you grow and create a profitable, thriving agency!