COVID-19’s Impact on the Insurance Industry Will Continue Well into 2021
TransUnion identifies key insurance trends for the new year
The COVID-19 pandemic has served as a watershed moment for the insurance industry, accelerating digitization efforts and challenging insurers to better understand their customers’ needs. What’s in store for 2021? TransUnion (NYSE: TRU) looks at four trends that will influence the insurance industry in the new year.
To equip U.S. insurers with a deeper understanding of these key trends, TransUnion conducted a survey of 3,148 U.S. consumers with active auto, homeowners, renters and/or life insurance policies during the first week of December.1 The findings that stood out most throughout the research was that the impact of COVID-19 will be felt well into 2021.
“COVID-19 pushed the need for nascent, innovative digital solutions and services to the forefront of standard insurance industry operation. The unpredictable environment that lies ahead indicates consumers and businesses will increasingly rely on and choose insurers offering online resources and tools that can best meet their needs, particularly as digital adoption continues to grow,” said Mark McElroy, executive vice president and head of TransUnion’s insurance business. “The 2021 trends and insights revealed by our latest consumer survey can help insurers develop a better understanding of consumers and businesses while also equipping them with information to build a reliable basis for trust with those they serve.”
COVID-19 Will Continue to Impact the Insurance Industry in 20211
Percentage of drivers that use their vehicle less than pre-COVID-19 or do not use it anymore*
Percentage of respondents that plan to make changes to their vehicle ownership/use in 2021
Percentage of drivers that would allow their insurance carrier to collect real-time information about their mileage and driving habits if it led to lower premiums*
Percentage of respondents that would choose to work at home in 2021
*Only asked of those respondents who own or lease a car (i.e., 90% of respondents)
TransUnion Forecast: Four Insurance Trends to Watch for in 2021
Trend #1: The financial and economic challenges brought forth by COVID-19 will continue to impact consumers and businesses, potentially leading to profitability impacts for insurance carriers down the road.
The ongoing economic and financial effects of COVID-19 will impact consumers and businesses well beyond 2020. Looking at the next three months ahead, TransUnion’s consumer survey indicates respondents are primarily concerned about being able to pay for their auto insurance bill (44%), followed by their car payment (26%), mortgage payment (23%) and life insurance bill (22%).
Looking at personal auto insurance, it is estimated that U.S. auto insurance carriers will return $14 billion to customers in an effort to provide COVID-19 financial relief and as a result of fewer miles driven.2 However, consumers remain concerned about their ability to cover their insurance bills, in addition to their home/auto payments. A recent TransUnion analysis also noted an increase in the distribution of higher risk auto insurance shoppers as well as those with payment accommodations in 2020.3 Factors such as rising unemployment and varying financial impacts may be contributing to this trend, and it will be imperative for insurers to be able to identify which customers are facing COVID-19 hardship to strengthen engagement.
Within the commercial automotive space, TransUnion has observed that many insurers are experiencing relative stability in underwriting performance in the short-term resulting from fewer claims on less congested roads and less miles driven, among other confluent factors. As the broader environment begins to normalize, insurers will again need to implement strategies that help them increase segmentation and remain competitive in the wake of COVID-19.
Trend #2: Consumers and businesses expect insurers to have a greater understanding of their individualized needs in light of shifting behaviors and preferences.
Consumer and business insurance needs have evolved over the past year in response to COVID-19. Key drivers of this evolution include a significant reduction in miles driven leading to fewer claims, an increase in remote work and ongoing financial hardship. The lingering effects of these challenges will have an outsized impact on how insurers must approach and interact with customers in 2021 and beyond.
For respondents who own or lease a car (90%), TransUnion’s survey indicated that 72% used their vehicle less in the time since COVID-19 was named a global pandemic or don’t use their vehicle anymore. Given this drop, there may be greater consumer interest in usage-based insurance and telematics programs. The survey found 61% of drivers would allow their insurance carrier to collect real-time information about their mileage and driving habits if it could lower their premium.
Looking at the commercial and personal property space, respondents expressed a strong preference for at-home settings when asked to choose their preferred work environment for 2021 – 37% of respondents cited a preference to work at-home, and 31% preferred a hybrid of working in-person and at-home, with more time spent working from home. These findings may signal less demand for commercial real estate as well as broader shifts within the commercial and personal space as employers extend work-from-home policies or adopt hybrid work environments to best address employee needs and operational demands.
Trend #3: Insurance digitization efforts will continue to strengthen in 2021.
Digitization accelerated in response to the COVID-19 pandemic as insurers looked to better serve customers and remain competitive in today’s evolving marketplace – digital adoption in the insurance industry grew 20% globally in the past year.4 This transformation is taking place across the insurance policy lifecycle, from marketing to claims submissions to digital policy servicing. In fact, TransUnion’s survey found that almost half of respondents (47%) filed an auto and/or property claim in the last year, and of those, nearly four in 10 (39%) used a mobile app, website portal or e-mail.
Consumer preferences for interacting via digital/online platforms also support this trend. The survey found respondents preferred to communicate with an insurance provider primarily via e-mail (32%) and telephone calls (32%), followed by an insurer mobile app or website portal (18%). As digitization grows, insurers must balance introducing and expanding digital customer interactions while also delivering friction-right experiences and protecting against fraud.
COVID-19 social-distancing guidelines and stay-at-home mandates also have exacerbated the need for digitally-driven solutions within the life insurance industry. One such way life insurers are meeting this need is with accelerated underwriting, which leverages third-party data to streamline the traditional underwriting process (which can require an in-person visit to an applicant’s home).
Trend #4: Extreme weather events will drive an increase in the number and severity of disaster-related claims in 2021 and beyond.
In tandem with the unprecedented, global impact of COVID-19, the U.S. also experienced record-breaking numbers of natural catastrophes over the past year.5 TransUnion’s survey uncovered 21% of respondents were impacted by natural disasters in the last 12 months.
Recent weather trends, signs of climate change, and ever growing exposure in high-risk areas suggests the industry will likely continue to see this demonstrable increase in the frequency and severity of natural-disaster related claims. While loss mitigation opportunities improve, insurers will need to continuously assess risk and implement proactive strategies to address operational challenges and manage risk for businesses and consumers.
During times of unprecedented financial hardship, trustworthy and comprehensive insights and solutions will be vital considerations for insurers in the year ahead. For more information about how insurers can gain market leverage for 2021, visit https://www.transunion.com/industry/insurance.
1 TransUnion 2021 Insurance Trends Consumer Survey (conducted December 3-4, 2020 among 3,148 U.S. consumers ages 18+ with active auto, homeowners, renters, and/or life insurance policies)
3 TransUnion 2020 Insurance Shopping Annual Report
About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing a comprehensive picture of each person so they can be reliably and safely represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good.®
A leading presence in more than 30 countries across five continents, TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people.