People, regardless of age, are driving faster and with more distractions.

There’s an advantage to decades of analyzing data and trends. You quickly learn what’s relevant long-term and what’s just a blip on the screen.

Every year, our Crash Course examines millions of data points to identify the trends affecting the property & casualty (P&C) insurance economy. We look at everything from shifts in driving behavior and advances in vehicle technology to the macroeconomic business and social shifts driving change. Despite the constant headlines around post-COVID and supply chain, the story is much bigger.

What we’re seeing are megatrends (aka seismic waves) that were in play well before the pandemic. We’ve flagged these trends before, and while some have continued, some accelerated and some flipped, the persistence of many are driving tremendous change and financial pressure across the P&C insurance economy.

The ground is shifting beneath our feet

So much of what’s changing alters what we’ve always taken for granted: how and when people drive, how vehicles are repaired, and even how cars are built.

For starters, the U.S. population is shrinking and wrinkling. Between lower birth rates, more deaths and less net immigration, population growth is at an historic low. Drivers are getting older, which means fewer accidents but also greater claim complexity when serious accidents occur and pre-existing conditions come into play.

People, regardless of age, are driving faster and with more distractions. And, despite minor reversals to the pandemic-driven urban and office exodus, the overall population remains shifted away from congested urban areas. While there are still plenty of drivers stuck in rush hour traffic, most are doing so in the Southeast and Southwest. Instead of fender benders on major highways during morning and evening commutes, we’re seeing more open driving accidents in non-peak hours, ramping up accident severity, personal injuries, and repair complexity and cost. Slower recovery in liability losses underscores how traffic patterns and congestion levels may have changed, permanently.

As our population ages, so too does our workforce. Labor participation remains at historic lows, affecting the ability of key industries like insurance, repair and health care to attract, train and retain new talent. The 2022 FenderBender Industry Survey revealed that collision repair shop owners cite the labor shortage as their single biggest challenge. And it’s not alleviating soon — with only 4,500 graduates from post-secondary collision programs in 2022 slated to fill an annual demand for new entrant technicians of over 35,000 (per TechForce Foundation 2022 Technician Supply & Demand).

Insurers are facing the toughest recruiting environment they’ve seen in decades. With a quarter of their employees aged 55 and above, insurers must stem a looming brain drain and get creative with their workforce development strategies. And when it comes to healthcare, declines in clinical support staff and physicians are proving to be the biggest barriers to quality and availability of medical care for auto casualty claimants.

None of the above is good news, but it’s complicated further by a dramatic increase in vehicle complexity. The average car is now packed with 1,400 semiconductors that control everything from airbags to the engine. More electronic componentry requires more labor time and different labor skill sets (the percent of claims mandating repairs with mechanical labor is above 40% compared to 20% just 5 years ago). Everything that’s making “smart” cars safer drives more part replacements and labor hours to repair than ever before.

Challenging the core

These dramatic shifts in how people work, live and drive are already having profound impacts on the P&C insurance economy, adding more complexity, cost and time into the claims and repair process.

As a result, customers will likely experience greater frustration and lower satisfaction at every stage of the claims and repair process. Capacity issues stemming from labor shortages in the collision repair industry translate to a repair scheduling backlog of nearly six weeks as of Q1 2023. This drives claim cycle time from loss report to vehicle pickup to over 50 days in 2022 from just over 30 days in 2018.

In addition, auto casualty will experience its own whiplash, with damage to vehicle occupants becoming more severe. Instead of fender benders that leave drivers with sore muscles and chiropractic visits, high-impact, open road collisions have resulted in more severe injuries such as fractures and head injuries that require diagnostic radiology, patient evaluation and management, and hospital inpatient procedures.

This can leave insurers and repairers reeling from higher costs. Profitability for insurers will prove challenging for some time, with the personal auto net combined ratio expected to exceed 100 through at least 2024. Repairers will have to make tough decisions around capital investments to ensure they have the tools, training and people necessary to repair today’s vehicles.

What now?

As with any major change, the industry will need to come up with strategies, preventative measures, and new technologies to navigate, and maybe even define, what’s next.

To tackle the shrinking insurance labor force, we’ll likely see even further acceleration in the adoption of transformational technologies like automated accident detection from telematics data to natural language processing that enables replies to consumer queries in a digital format. We’ll go deeper into areas where progress has been made — for example, straight-through processing. Instead of using AI to generate partial estimates that are then completed by humans, it is now possible — for some accidents — to create the entire estimate via automation and integrate that estimate through the entire process. Now that photos are becoming more ubiquitous in the process, we can calculate Delta-v upfront much faster than before to triage casualty workflows more efficiently.  This has the potential to improve speed, reduce costs and provide more personalized, 1-to-1 consumer experiences.

To date, more than 150 carriers now enable policyholders to send collision damage photos, and roughly 100 carriers apply CCC’s AI to determine the next steps for repair. Benefits from this process have been measurable. According to a CCC survey, 84% of consumers prefer this new digital process because it’s user-friendly and it’s cutting their claims cycle time, from crash to keys, by as much as one-third.

Insurers can also turn to AI to capture the knowledge and experience of their retiring workforce and provide “learning by doing” tools that guide new entrants and ensure consistency in the claims process.

Similarly, repair facilities could introduce advanced technologies like augmented reality (AR) and AI to accelerate productivity in the face of a labor bleed. AR can support the repair process, offering “Genie on your shoulder” support — be it an optimized repair plan, taking pictures on command, documenting damage that may not have been previously diagnosed, or connecting technicians to a resource if they have questions on a particular issue. Automating the “back office” frees up more time for repairs. Digital technology and AI can streamline and optimize parts ordering, invoicing, payment reconciliation, payroll, and even website development and the management of reviews.

Introducing technology that helps automate and expedite repetitive tasks will free up time to focus on value-added skills and services that enhance customer satisfaction and allow for more customer-facing interactions. Insurers can focus on offering a more concierge-level experience, deploying their workforce in a way that builds on their competitive strengths, for example offering a curated experience on a single platform connecting all parts of the claim and repair process.

The road ahead

After nearly 30 years of data and analysis, we’re hard-pressed to point to another time in our industry’s history when so much change and transformation was taking place across such a broad swath. It’s impossible to predict the future, though the steep increases in complexity across nearly every measure are not going away and neither will the need to provide high-touch personalized customer service to resolve auto claims and to complete repairs. Tools like AI and digitization are driving efficiency and enhancing the experience already, and we’re still in the early days of our industry’s digital transformation.

Jason Verlen ([email protected]) is vice president of product marketing at CCC.

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