Is car insurance a term you hear less frequently in the recent past? Car insurance has been a lucrative business for decades; however at present market is looking less favorable. It is still quite a popular term in the South Asian Region but it is increasingly diminishing in North America and the European region. KPMG one of the world?s big four auditors have stated that by 2050 the insurance industry for cars will shrink by 70%. How does this affect the price range of insurance? At present the price ranges of car insurance in North America are fluctuating. This is caused by the necessity of Car insurance companies to survive this challenge and their struggle to minimize the increasing losses faced by these companies owing to heavy claims.
According to More Accidents, Larger Claims Drive Costs Higher published by Insurance Information Institute: The dollar amount of claims per vehicle per year known in insurance as the loss cost is rising. Loss costs are the largest component of the price of auto insurance. They are also the most volatile. Whatever direction they move, rates will eventually follow. In recent years, total loss costs have been moving considerably higher rising 13 percent in the two years ending March 2016 more than 10 times the inflation rate (Hartwig, Lynch, & Weisbart).
According to the paper 2015 and 2016 showed a growth of Americans driving more miles which has led to more collisions and thereby more claims, this may be due to the increasing percentage of people travelling long distances for employment and the adverse weather conditions in North America.
However, with the increase of prices comes less of a demand, as mentioned earlier in the article; car insurance is a term fast diminishing. While many prefer driving miles, a new trend of hiring an Uber or another transport service to reach specific destinations has taken the transport industry by a storm since late 2016. People are opting more and more to be driven to their destinations rather than tackle the hassle involved when it comes to Automobile ownership.
Thereby, in an effort to maintain a balance between rising trends and transport hazards, insurance companies have become victimized resulting in the fluctuation of insurance prices, which also does not translate well through the Customer’s perspective. The way forward for car insurance companies is to update their policies more frequently to match the needs of the market.