How Tech Adoption Shifts Market Share
There are two basic ways to gain market share: through slow but steady growth and through bold moves that take advantage of major shifts in the market. Now, the next big change is here. For insurance companies daring enough to do something different, recent advancements in AI and machine learning offer a way to rethink underwriting to seize market share.
It’s Happened Before
The times we live in may feel unprecedented, but momentous change and technological innovation have happened before. The companies that seized these opportunities came out ahead.
The Ford Motor Company is a good example. Henry Ford did not invent the automobile, the assembly line, or the conveyor belt. However, by applying the assembly line to car manufacturing, he was able to produce more affordable vehicles and in greater numbers than his competition.
According to Ford, other industries at the time were using conveyor belts, including slaughterhouses. It took some trial and error, but, in 1913, Henry Ford began using the moving assembly line in his factory.
The rest is history. Henry Ford seized a large market share of the growing automobile industry and created a brand that has continued to endure for more than a century.
Insurtech Early Adopters Have Also Gained an Advantage
Usage based insurance is another example. Early-adopters that leveraged technology to explore a new way of underwriting are now well positioned for growth.
According to MarketsandMarkets, the usage-based insurance market was worth $30.6 billion in 2023 and is expected to grow at an impressive compound annual growth rate (CAGR) of 21.4% to reach $80.7 billion by 2028.
Companies that embraced this opportunity early on have come out ahead. Progressive is a prime example. According to Investing.com, Progressive shares were recently upgraded, based on the company’s potential to increase its market share further in the coming years. Progressive is expected to see personal auto premium growth of 18% to 19% in 2024. The company’s early adoption of telematics and its innovative approach to technology is listed as a main factor.
The Machine Learning Opportunity Has Emerged
Huge breakthroughs are occurring in machine learning. This is leading to the next momentous change for the auto insurance sector. If we’ve learned anything from history it’s that early adopters will be the ones who earn a significant share of the market.
According to Google Research, recent accelerated advances in machine learning mean the technology is now capable of understanding natural language, engaging in conversation, and more.
Machine learning has many applications, including predictive analytics. For example, IBM says predictive analytics used in financial services can determine who is most likely to default on a loan. In human resources, they can assess employee turnover and engagement, whereas in marketing, they can initiate conversations that improve retention. The predictive analytics market is expected to be worth $28.1 billion by 2026, according to MarketsandMarkets, growing at a CAGR of 21.7%.
The usage-based insurance market was worth $30.6 billion in 2023 and is expected to grow at an impressive compound annual growth rate (CAGR) of 21.4% to reach $80.7 billion by 2028.
21.4%
$80.7
billion
Which Insurers Will Seize This Opportunity?
Ford seized opportunities created by the assembly line, Progressive by telematics and usage-based insurance. The question now is: who will seize the machine-learning opportunity?
In the insurance sector, machine learning and predictive analytics can develop a risk scoring model based on characteristics, patterns, and key indicators. The technology couldn’t have come at a better time – Risk & Insurance says the U.S. property and casualty insurance sector experienced its worst underwriting loss in more than a decade in 2023, with data from AM Best showing an underwriting loss of $38 billion.
Many insurance companies have responded to rising losses by pulling out of markets or shutting off entire segments. These actions may cut losses, but at the expense of market share – meaning that market share is now up for grabs. Insurers that find a way to more accurately select risk without turning off entire segments can gain a larger market share, while controlling their underwriting losses. Thanks to the recent advances in machine learning, this is possible.
Soteris: Rate-Adequate Risk Selection
Now, instead of only relying on old underwriting rules and third-party data to make risk selection decisions, you can leverage the Soteris risk scoring tool, which harnesses intelligence derived from your own historical loss data.
In less than one second, Soteris assesses each risk’s multitude of variables, and how they stack up against the rate to individually score each quote’s rate adequacy. Powered by machine learning, this tool is able to detect loss trends and patterns far beyond those identifiable by humans.
As a result, you can leave all segments turned on, and individually quote only the rate-adequate risks. This system can be set up with existing rate filings, alongside existing systems within four months.
Are you ready to seize the early-adopter advantage? Email Soteris to learn more.
