Auto insurers should brace themselves for a number of changes over the next few years. Inflation, changing consumer behavior, new regulations, looming financial crisis are just a few of the things that will impact the industry. In this blog post, we'll take a closer look at what you can expect in 2023 and how you can prepare for it. Stay ahead of the curve and ensure your business is ready for whatever comes next!
Why are auto-repairs more expensive?
Inflation has been a hot topic lately, and for a good reason. The current inflation rate is at 9.1%. To compare, the Federal Reserve set its annual target at 2%, and several factors could continue to drive it up in the coming years. This can be concerning for insurers, as it raises the cost of goods and services they must provide coverage.
Auto repairs and the auto parts industries are no different. They are suffering from the effects of the high inflation rate, meaning that prices will only be getting higher in the foreseeable future.
Supply chain shortages
Supply chain shortages have led to higher prices due to demand going higher and supply dropping. The auto parts industry is no different; there has been a massive shortage in car parts, driving the prices higher and increasing the repair prices for car damages.
Supply chain disruptions became so common and disturbing to the automotive industry that Ford had to shut down some of its North American assembly plants earlier in 2022 due to a lack of electronic chips.
Moreover, the Covid-19 pandemic has led to many shops and services closing and many repairs being delayed during the lockdown. Once businesses are up and running, the waiting queues are longer, and the demand is higher, while the supply was cut down by the supply chain shortages, driving the prices higher.
Looming financial recession
Economists define a recession as two consecutive quarters of slow growth. All of the above, sadly, are indicators of a looming recession. U.S. GDP contracted by 1.6% in Q1 of 2022, and current models are projecting another 1.2% drop. This means that people will spend less money and save more.
Even though this could mean that demand will be smaller, that is not the case for auto repairs where cars are necessary. Still, insurance companies will have to deal with higher costs while facing difficulties raising premiums.
So, what should auto insurers expect in the second half of 2022?
Auto insurance insights and trends for 2022
There are specific challenges we can notice from the above trends, some of which are:
Higher repair costs: With inflation and supply chain shortages, auto repair costs have gone up more than 14% between 2021 and 2022.
More claims: Many policyholders opt to pay for their own auto damage repairs for smaller accidents to save on their premium growth. However, with more savings to come and businesses reopening, insurance companies can expect more claims to come their way.
Higher auto insurance fraud rate: Auto insurance claims are one of the most common types of fraud that insurance companies face. Financial recessions always lead to higher fraud claims as people struggle to meet ends.
Premiums will be harder to raise: With the fear of recession, and the interest rates going higher, people will try to save more. Raising premiums will ask policyholders to dig deeper into their pockets, which will face backlash as people try to cut their spending.
How can Legentic Mohawk help auto insurance companies uncover fraud and cut losses?
Legentic Mohawk is equipped with +8 billion data points collected from over 22 countries and a multitude of sources. The Legentic Mohawk Portal and the Legentic Mohawk Automation can boost auto insurance claims and SIU departments by directly looking at historical and real-time digital behavior of policyholders by directly searching for the car VIN or plate number, policyholders' email, phone number, and online nicknames.
Through Legentic Mohawk, you will be able to:
Integrate Legentic Mohawk data directly into your claims environment
Boost your straight-through processing
Limit false flag
Boost employee satisfaction by cutting manual work
Have access to high-quality data
Boost customer satisfaction by faster claims processing.
Want to learn more about Legentic Mohawk? Contact us today and get your real-life demo.