Changing the Game: Challenges and Innovations in Commercial Auto Insurance

Our research revealed a market in the thick of digitization. Key findings for commercial auto insurers include:

• 96% of carriers report that data accuracy is a top concern.
• The average time for commercial auto carriers to generate a quote is three days.
• The ideal amount of straight-through processing for organizations is 60%-90%.
• Within two years the majority of carriers would implement the bulk of advancements that were not yet underway.

The key to success? That will lie in how effectively commercial auto insurers manage to attain and ingest accurate and fully digital underwriting data.

While the market is moving swiftly, there’s opportunity for carriers in the beginning stages of the digital journey to take the lead, especially when it comes to solving the number one challenge around data, data accuracy. Powerful solutions are available to bolster quality, completeness and overall accuracy, including:

• Data prefill solutions that deliver robust information on businesses with high hit rates and confidence score.
• Motor vehicle records to inform risk assessment for more accurate pricing.
• Driver and business models that unlock advanced scoring and segmentation capabilities.
• Contributory assets that deliver difficult-to-procure data on drivers and claims.

In our study, we defined digitization as taking manually provided information and leveraging that to create and automate actionable insights. Auto carriers indicated the primary challenge they want to solve is improving data accuracy. Technology constraints, length of time to generate a quote, profitability, and customer experience are concerns as well, but improving data accuracy tops their list.

1. The motivators fueling the digital journey.

When asked about the amount of digitization commercial auto underwriters have undertaken, 92% say they want to do more. They view digitization as a lever to help eliminate friction and win more agent business.

Carriers know their landscape is competitive. When we inquired about the primary driver behind digitization, data quality wins out again. Of the total, 68% of carriers cite the need for better quality data for risk assessment and pricing, beating out competitive, experiential or profitability motivators.

The use of strong data to inform processes has knock-on effects and will underpin the success of automation efforts. It’s critical that commercial auto underwriters get this right.

2. Automation is the name of the game.

In our study, we defined automation in underwriting as a process that allows straight-through processing, involving little to no underwriter review during the process. Carriers have undertaken a variety of efforts to reduce quoting times and friction in the application process to unlock more straight-through processing capabilities.

3. Plans for straight-through processing.

In our research, we defined straight-through processing as an initiative in which the application process would streamline the end user experience and ask minimal information. Almost 90% of carriers report that achieving straight-through processing was important for their organization. Yet in 2023, carriers were implementing straight-through processing on 40% or less of their applications, but the majority cite that the ideal state sits between 61%-90%. While carriers know straight-through processing offers value, it's clear that because 100% is not the goal, they recognize the need to balance it with human expertise and intervention. To achieve target states, carriers will need to address how they intake application data, as 84% report they either key in results, use a PDF reader, or scan applications from mobile phones that deliver structured or unstructured data.

Given intake mechanisms, it’s no wonder that carriers report an average of three days to provide a quote. While commercial auto carriers are making strides toward straight-through processing.

4. How prefilled data plays a key role.

Only 8% of commercial auto carriers report leveraging comprehensive data prefill capabilities, with the other half of prefill users relying on returns that are limited to basic business information. The good news is that most auto carriers plan to adopt more robust prefill capabilities. This suggests a small window where more comprehensive, prefilled data can offer early adopter benefits before they become table stakes. Data accuracy continues to underpin critical digitization efforts. If prefill solutions on which carriers are basing risk decisioning is faulty or incomplete, carriers will be left grappling with rapidly generated, inaccurate quotes.

If carriers are looking to increase levels of straight-through processing, tap into automated quotes and gain a competitive edge, solving the problem of data accuracy must take precedence. Comprehensive prefill capabilities stand uniquely positioned to resolve multiple pain points. By unlocking automation from the point of quote, these solutions can put underwriting processes on an efficient and automated path. Additionally, they can return robust, more complete information on businesses, so underwriters (or their systems) can utilize quality, precise data when they need it. Carriers aren’t waiting to make their moves, and a lot will happen over the next two years. For those not fully immersed in the digital revolution, the time to join in is now. Buckle up, because it will be an exciting ride to an even more exciting destination.