The auto insurance landscape is shifting. Between the increasing cost of auto insurance, labor shortages slowing efficiency, and the evolving role of tech in insurance processes, consumers and businesses alike are finding themselves adjusting to a new wave in the industry.
For dealerships, staying on top of these trends is crucial for understanding customer needs and maintaining a competitive edge. Let’s talk about the biggest developments to watch this year, plus how to leverage new innovations to get ahead.
Auto Insurance Trends in 2024
The auto insurance industry has seen a lot of developments since its genesis in 1898, particularly in the period following the 2020 pandemic. We’ve identified a few highlights that stood out over the past year.
Increasing frequency of claims
After a brief dip during the pandemic lockdowns, claim rates have not only rebounded but surpassed pre-pandemic levels. Several factors contribute to this trend, including increased risky driving behaviors, particularly among younger demographics. Distracted driving violations by Gen Z drivers have skyrocketed, increasing 24% between 2022 and 2023.
The rise in electric vehicle adoption has also introduced new challenges, as EVs tend to have higher claim frequencies and severities compared to traditional vehicles. The overall landscape of driving has changed, with more vehicles on the road and a shift in driver demographics towards less experienced individuals. These factors, combined with deteriorating infrastructure and increased traffic density, have created a perfect storm for more frequent auto insurance claims.
Heightened claim complexity
Claim severity has steadily trended upward since the pandemic, with bodily injury claims rising by 20% and material damage increasing by 47% compared to 2020 levels. This surge in complexity is partly due to ongoing parts and labor shortages, which have prolonged repair times and increased costs.
Attorney involvement has also contributed significantly to the rising complexity and costs of claims. Over half of claimants who hired an attorney received higher settlement amounts, with 85% of claimants being approached by at least one attorney following an accident. This trend has led to longer settlement times and increased legal expenses.
Rising insurance premiums
Over the past couple of years, auto insurance costs have skyrocketed, placing a significant financial burden on drivers across the United States. In 2024, we saw the average annual cost reach $2,543– a 26% increase from 2023.
Some are drawing parallels between this and the economic landscape of the 1970s, which was plagued by oil shocks and high interest rates. However, industry experts attribute the current trend to a variety of factors. In addition to the increasing cost of claims that carriers have to bake into their pricing, some have also pinpointed supply chain-driven price increases and the need for insurers to cover their underwriting losses from 2022 and 2023.
Regardless of the causes, increasing insurance premiums have a profound effect on consumers’ decisions. According to the latest report by the Insurance Information Institute (III), 14% of motorists are uninsured. As these trends persist, consumers continue to face the challenge of balancing adequate coverage with affordability in an increasingly expensive auto insurance landscape.
What This Means for Car Dealerships
As an auto dealer or lender, it’s important to consider the impact of these trends on your business in order to adjust your strategy.
For one, rising insurance costs fuel a growing temptation for drivers to forego coverage, potentially increasing the number of uninsured motorists on the road. At the same time, the increasing frequency and severity of claims amplify the risks associated with leasing or financing vehicles to uninsured drivers.
Combined, these effects put dealerships in a precarious position. The higher likelihood of dealing with uninsured customers not only increases the potential for financial losses but also necessitates more rigorous verification processes.
Altogether, this can lead to increased operational costs, longer sales cycles, and reduced profit margins for dealerships. To navigate this changing landscape, dealerships must adapt their policies and leverage new technologies to mitigate these risks effectively.
Emerging Developments in Insurance Verification
The InsurTech industry has seen a lot of major developments in the last year, including innovations aimed at mitigating risk for dealerships and lenders. When figuring out how to improve your insurance verification, consider these key trends and new advancements.
Automating analysis with AI
Insurance verification can be a hidden cost center for dealerships. The traditional process, from requesting proof of insurance from the customer to reviewing the official policy details from the carrier, can take up to 30 minutes. This not only slows down dealership operations but also extends customer wait times.
Studies show that extending F&I wait times by 30 minutes leads to a 19-point decrease in NPS score, significantly impacting customer satisfaction. To address this, forward-thinking dealerships are starting to automate this step in the car buying journey.
In the last couple of years, we saw a surge in adoption of insurance verification solutions that allow dealerships to access policy information directly from the carrier. This evolution enabled businesses to reduce time spent retrieving documents and calling carriers.
Now in 2024, we’re seeing a rise in digitization of the end-to-end verification process, from document collection to analysis. With the latest AI-powered solutions, dealers can quickly pull policy information, analyze insurance documents, and generate results– reducing the verification process to mere minutes.
Fraud detection
Fraud is on the rise– particularly a new type of crime called synthetic fraud. Synthetic fraud is a novel form of identity theft in which fraudsters combine real and falsified information to create a fake identity.
Analysts saw a staggering 98% increase in synthetic identity attempts in 2023, contributing to a total of $7.9 billion in fraud risk exposure for the auto industry. Due to the rapidly advancing capabilities of AI, it’s becoming increasingly difficult to identify this type of fraud, even with thorough training.
To combat this, many dealerships are tightening up their fraud detection processes. This includes replacing manual ID collection with algorithmic ID checks. For some, it also means using insurance verification as an additional barrier to flag suspicious profiles.
Moving away from manual monitoring
Traditionally, most companies monitor their borrowers’ and lessees’ insurance by getting added to the policy as additional interest. With this designation, they’ll get notified about any cancellations by mail. But more recently, many have found that this method can be unreliable, often subject to delays and errors.
Fortunately, some insurance tech software is making it possible to automate this process, cutting administrative burden while reducing lag. Instead of relying on additional interest like manual insurance tracking services, these solutions pull data directly from the policyholder’s carrier. Companies can use these applications to set up ongoing monitoring in order to keep tabs on their customers’ coverage hands-free.
Upgrade Your Insurance Verification Process
In today’s volatile market, adopting new technology is key to staying agile and gaining an edge over your competitors. When deciding where to invest your time and resources in 2025, consider the ROI of upgrading your insurance verification process. While often overlooked as a mandatory step in the car sales process, changing the way you verify insurance could have a major impact on your business, from reducing labor costs to boosting customer experience.
CheckMy Driver is the only auto insurance verification solution that automates your process end-to-end, from document retrieval to analysis. With integrated ID checks and monitoring, it also provides valuable protection and intelligence throughout the customer journey. Learn more about how CheckMy Driver can work for your business, or schedule some time with our team.
