U.S. auto insurers invest heavily in new customer segmentation and underwriting. But over time, household and driver risk profiles can change. Insurers without a proactive renewal strategy could be missing out on an estimated $4.9 billion in overlooked premium annually1 .
Alterations in driving behaviors or changes within the household after the policy is written can cause risks to shift. A proactive renewal strategy can provide REAL data intelligence to help maximize profit potential by capturing additional premium, providing important insights about risk and nurturing a more consistent underwriting result.
A robust renewal strategy can help you identify when risks have had a meaningful change in rating or eligibility. Without underwriting discipline and a strong renewal strategy, you could be subsidizing higher risk profiles already on your books. Further, by not understanding these risk changes and applying them to the appropriate profiles, that rate need will end up being spread across base rate or other less specific factors, ultimately impacting rate competitiveness for what could be target risk groups.
You are likely already using data to some degree at renewal. But additional data is available that can provide valuable insights. Missing driving violations, undisclosed drivers on the policy and undetected claims in first term policies can result in key knowledge gaps. These knowledge gaps are directly linked to higher loss costs, but can be mitigated with timely, comprehensive and actionable data insights that can be integrated directly into your underwriting workflow.
Unfortunately, if you do not implement effective renewal strategies, the riskiest drivers are likely to stay with you. After a claim, some policyholders may have shopped rates and received a higher rate from another insurer. As a result, they may be reluctant to leave. According to our studies, violation data has little effect on retention. So, the move is yours.
Now is a great time to review your current renewal underwriting strategy to support 2024 profitability objectives and strengthen your position for the next market cycle. Find the low hanging fruit by leveraging existing data and underwriting rules already in your workflow – no rate filing or large IT investment required. Actively leveraging appropriate internal and external data to maintain price to risk at renewal can help boost efficiency and accuracy that results in long-term consistency for optimum product performance.
1 LexisNexis® Risk Solutions internal study