If we have learned anything over the past year and half, it is how quickly the market can be influenced and changed on a global and local scale.
Insurance companies are responding now to dramatic inflation in the cost of used vehicles, vehicle parts, and repair labor. Loss cost has skyrocketed for physical damage related to PD liability, collision and other than collision. Much as bodily injury social inflation surprised carriers in 2015, so they are surprised now by physical damage. During 2020 carriers were pressured to lower rates due to the decline in miles driven; however, in Texas miles driven only declined slightly, and miles driven are now much higher, putting carriers behind the curve on needed rate increases.
The below graph shows the quick growth in used car prices.
Rate increases will be felt in renewing policies over the next 12 months and may incline consumers to shop their insurance, however, inflationary impacts on daily purchases may suppress insurance purchases.
The cost of fuel continues to climb with great concern from some economists of it climbing much higher. In the non-standard auto space we've seen historically a slowdown in purchases when fuel prices rise.
The clogged supply chain has consumers spending early on holiday purchases for fear products will not be available during the typical buying season. Container ships are sitting unable to load due to lack of labor, delaying store arrivals and increasing demand and prices. While insurance agents generally see a slow down in late fourth quarter with new policy purchases, the early holiday shopping may suppress insurance purchases even sooner.
How should agents respond to this unique environment?
First, ensure you're communicating consistently with your current client base. Offer to review at renewal and seek options while also educating your customer on why rates have changed. Educating your client increases your value to them.
Start community support programs earlier this year. If you raise money for food banks, Toys for Tots etc. begin your fundraising and promotions now. Show your client you are aware of community needs and engaged in supporting your neighbors.
Focus on 2022 marketing and messaging. Plan now for how you will reach consumers in the coming year. Our marketing team is here to offer ideas and introduce you to various tools at your disposal.
I am available if you have any additional questions or input. Text me anytime.
In service,
Don Owens