State of Insurance Rating COVID-19 Weather Report #3

April 13, 2020 Laird Rixford

 

ITC will continue to provide these ongoing weekly weather reports throughout this situation. These reports provide agencies and carriers a general baseline of their operations.

This week showed a clear response to COVID-19 by insurance carriers to consumers. As insureds abandoned the roads, the frequency of claims and accidents dropped considerably. The drop in traffic was an estimated 50% or more, which equates to an estimated 40% lower frequency.

State Farm, GEICO, Progressive, Allstate, USAA, Liberty Mutual, Amica, American Family, The Hartford, Farmers, Nationwide and Travelers all promised to refund policy holders collectively more than $7 billion in premium.

Carriers made this offering under mounting scrutiny of an expected windfall they would receive from less drivers and accidents. It almost became a race of who could win the most press by announcing the soonest.

What was curiously absent from these proclamations is how the carriers are helping agents through this time. Agents are the primary source of new business for carriers. Carriers might be enjoying a bonus due to less drivers on the road. But, they are ignoring their greatest resource… the agent.

Many agencies are questioning if carriers will continue to pay commissions on the forgiven lapsed policies. There are also questions of whether carriers will provide some relief to agency partners in hopes to overcome the lower than expected new business.

The reality is these concessions might be too little for the consumer. A refund or dividend of $30-50 per car will not substantially assist the people who are struggling. Insurers should direct the gain they receive to their agency partners. It might be just enough to help agents survive so they may in turn continue to service their mutual clients.

The following weather report is for April 6 through April 10, 2020. It covers how this slowdown in consumer behavior is affecting agents and their businesses.

 

Week of 4/4

As predicted in last week’s weather report, quoting volumes settled in the mid-30%s. The week’s average was 34.7% below the expected quoting volumes usually experienced by agents. Monday and Friday were outliers in the data respectively at 35.6% and 37.6% below expected.

Online quote requests remained above normal throughout the week averaging 2.4% above expected targets. This continues to point to a trend of consumers going online to shop and quote their insurance needs. Which is what we expected as everyone continues to practice social distancing.

Conclusion: Analysis indicates that middle 30%s below normal as the floor agencies should expect throughout the ongoing situation.

 

Variations by Liability Limits

This week we wanted to see if there was variability in quoting volumes based on the liability limits. State minimums (the “non-standard”), below $100,000/$300,000 (the “mid-market”) and $100,000/$300,000 and above (the “standard”).

There was no significant differentiation in the lower quoting volumes for the mid and standard markets. The variance between these two buckets was less than 1/5 of a percentage point. This tell us that it was affecting each equally.

Requests for non-standard limits was less affected than the higher limits requests. Request for state minimum limits performed 12% better than other coverage categories. We attribute this to the continued need for insurance while lowering overall insurance costs.

Conclusion: The impact of COVID-19 is impacting quoting regardless of liability limits.

 

Premiums & Payment Amounts

In the first State of Insurance Rating COVID-19 Weather Report, we analyzed premium and payment trends. In that report there was no fluctuations in either total premium, down payment or payment amount.

Premiums are at historic highs. So, we wanted to revisit this report to understand if there were any changes due to the lowered accident frequency . We observed no directional change to quoted total premium, down payment or payment amounts.

It is unreasonable for carriers to change rating algorithms quick enough to respond to this crisis. However, it is something ITC will continue to monitor within this weather report.

 

The Forecast

ITC predicts that quoting volumes will continue to remain below the expected quote activity in the mid-30s% through this week.

Premiums and severity continue to remain at historic levels. As such, the unprecedented multi-month decline in frequency will substantially benefit carriers. Agencies and carriers should find ways to work together during these extraordinary times.

The future of the industry depends on all parties working together. The insurance industry is a four-legged stool: agencies, carriers, vendors and consumers. Without one of us, stability will no longer be assured.

We must work together now. Reach out. Leave a comment below. Let’s talk about how we can help each other.

 

Next Report

Stay tuned as next week’s report will include the following:

  • A recap of this week.
  • A carrier view of the impact of the change in rating volumes.

 

Methodology

ITC maintains a regular baseline of expected quoting volume for TurboRater. We also maintain an expectation of submission and traffic upon the Insurance Website Builder, TurboRater for Websites and TurboRater Rate Engine API platforms. 

We built the baseline on a model that reflects multi-year historical performance, usage of the platform, state demographics, and market conditions using data from ITC’s business intelligence and analytical products.

The margin of error for the agency quoting and rating baseline averages less than 1.5% as calculated daily. The data analysis excludes rates returned without a premium.

The margin of error for the online properties and submission volumes averages less than 5% as calculated weekly.

All models only attempt to predict Monday through Friday. Agency operations over a weekend have too much variability.

 

 

About the Author

Laird Rixford

As CEO, Laird Rixford is responsible for providing strategic direction and leadership for the company. Rixford has a proven executive management track record and has more than 20 years of experience in entrepreneurship and insurance technology. An expert in insurance technology and marketing, Laird is a recognized public speaker and has presented at industry events across the United States.

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