In the latest insights from AM Best, it’s evident that innovation is driving significant competitive advantages for US personal auto insurers, particularly in areas such as automated claims management and data-driven underwriting.
Titled “Highly Innovative Personal Auto Carriers Have Significant Competitive Edge,” the report sheds light on the varying levels of innovation among insurers and how this impacts their performance in the market.
AM Best, a renowned credit agency assessing insurers’ innovation efforts since 2020, underscores the pivotal role of innovation in keeping pace with the ever-changing market dynamics. Helen Andersen, an industry research analyst at AM Best, highlights how innovation naturally aligns with the personal auto insurance sector.
The research findings underscore that highly innovative personal auto insurers not only capture greater market share and witness business expansion but also demonstrate lower combined ratios compared to their less innovative counterparts.
In particular, insurers identified as innovation leaders have experienced an impressive average net premium growth (NPW) of 13.3% since 2018, surpassing the 5.5% growth rate of the AM Best personal auto insurers’ composite.
The link between innovation and net premium growth has become more pronounced amid rapid technological advancements and evolving consumer preferences. The report emphasizes that embracing innovation is increasingly essential for insurers to secure enhanced returns.
However, despite the advantages innovation offers, the report acknowledges that some leading innovators encounter challenges in translating their initiatives into profitable underwriting.
Moreover, in 2023, AM Best downgraded the ratings of 18 US personal auto carriers, with a notable concentration of downgrades among those classified in the non-innovator categories (“Minimal” and “Moderate”). This underscores the inherent risks associated with lagging behind in innovation within the industry.
