We believe 2018 will see a continuation of the significant and industry-wide auto-insurance premium increases that began a little more than a year ago. More expensive repair work to more intelligently-wired cars is one of the largest drivers of higher claim costs, as are recent large-scale weather events across the U.S. (Hurricane Harvey destroyed 1 million cars storm-wide). There’s also been an unfortunate uptick in roadway fatalities after years of decline, some are saying due to more distracted driving while using phones and in-car technology. And medical costs continue their climb. But in our opinion, the industry’s failure to predict the rise in auto repair costs is the biggest cause for the ongoing search for rate increases to fix poor underwriting performance. We think that will continue for a couple more years.
Home insurance premiums as a whole haven’t seen material increases over expected inflationary pressures, but wildfires and severe storms present a rising concern as underwriters try to determine if we’ve been hit with some recent bad luck, or if we’re in this pattern for awhile. An immediate response to the rise of wildfires in populated areas is a diminishing interest in providing coverage in areas at risk for wildfire. We’re already seeing some insurance companies making wholesale statements like “in area X, no more home insurance will be offered due to wildfire concerns”. This may seem reasonable until that “area X” keeps expanding until it reaches where you live, or if insurance companies begin cancelling policies.
A few industry leaders are investing in new things, and we’ll likely see continued experimentation in pay-by-mile insurance, in shared insurance coverage with autonomous car manufacturers, in finding solutions for VRBO/Airbnb owners, drone insurance, and new ways to interface with prospective clients and active clients. What is not likely is the industry going back to the days of training, developing, and supporting experts to provide counsel, advice, and service to customers. We believe insurance companies will become more like faraway manufacturers and processors, and consumers will then search for outsourced 3rd parties for things like advice, special care, or advocacy.