What are the major challenges that the automotive insurance industry needs to tackle?

Author : kumar shrey | Published On : 02 Jan 2024

Auto insurance or automotive insurance is the insurance of motor vehicles (automobiles) against the risk of harm from events those insured. With the growth in the number of motor vehicles on the road, accidents have become recurring and may cost a big amount to vehicle owners, if not protected under the appropriate auto insurance policy. The developing complicatedness of the technology of the vehicles has also added to the cost of elements that might need a replacement or an upgrade.

Digital transformations are becoming increasingly necessary for companies in multiple industries. The automotive insurance industry is no exception, as it has long desired to update its data and application landscape, execute digital customer service, and combine front-to-back functionality. In addition to this, according to the research report of Astute Analytica, the ASEAN auto insurance market is growing at a compound annual growth rate (CAGR) of 5.6% during the forecast period from 2022 to 2027.

The major challenges that the automotive insurance industry needs to tackle are: -

Economic Inflation and Social Inflation

Social inflation is the rise in insurance costs due to legal and societal trends. This phenomenon can sometimes place insurance companies out of business, as they struggle to deliver coverage to the most helpless people. In other cases, social inflation can drive insurance companies out of business, resulting in out-of-reach renewals. To avoid encountering the consequences of social inflation, insurance providers must watch trends in liability court awards and form strategies to reduce risk. These risk factors may need quick adaptation of business plans and connections with business partners.

The Unpredictability of Vehicle Repair Costs

Many customers doubt insurance companies due to the unpredictability of vehicle repair costs. Whether they are claiming damage to their car or another person’s, obtaining an independent assessment of the repair cost is always a good thought before deciding to pay a settlement. Even if the estimate of the insurance company is lower than the actual cost of repairs, it is always advisable to obtain an assessment before signing a contract.

Scam In the Vehicle Repair Network

One of the most extreme problems encountered by automotive insurance companies is fraud or scam. While fraud does not necessarily have a victim, some perpetrators may utilize the fact that the crime is victimless to explain their actions. Many car insurance policies are fraudulent, with many consumers deceiving insurers to obtain the most out of their policies. These scheming claims often involve exaggerating an accident’s severity, staging a scene of an accident, and filing fraudulent insurance claims.

Inefficiencies in Risk Management

Reducing fraudulent claims has become critical to insurance companies’ bottom lines in the present environment of expanded internet sales and the rising complicatedness of auto insurance fraud. False claims cost insurance companies’ money and guide them to growth rates. Companies need highly skilled fraud analysts to develop a reliable vehicle inspection report for insurance claims.