As virtually everyone in the insurance industry knows, insurance carriers have been taking a bath in both commercial and personal auto, during the last year.  In several recent meetings I’ve attended, the message that rate increases are going to continue into the foreseeable future, has been loud and clear.

While losses are still developing (and growing worse) for 2016, the early results for 2017 do not look better.  Depending on which set of statistics you review, combined ratios for the industry are running somewhere between 107% to 111%.  Given that carriers need them to be 92-95% or lower, to make a profit, you can easily see the premium increases must continue.  In fact, one analyst opined that we need 25% to get out of the hole, and even with double-digit increases that we should expect to see, combined ratios continue to run 103% or greater for at least the next three years.

The drivers of these results are: increased frequency due to low gas prices, distracted driving (texting), and a dramatically increasing cost of repair (those back up cameras and computerized cars are expensive to fix).  It doesn’t look like there is much in those cost drivers that are likely to change.

As agents we experience and share in our customer’s pain. We certainly have a difficult task ahead to continue to explain these realities to frustrated or angry customers. Profit sharing is taking a hit for many agencies, too.  That’s the pain part.

We also have a lot of opportunity because of the auto market’s condition.  In the first place, agents are all getting a pay increase in the form of higher commissions, and smart agents are locking in customer loyalty by getting ahead of the PR battle and helping customers understand and cope with what’s happening.  Now is a great time to show how you’re different, with great, personalized, advice for each customer.  For independent agents, it’s time to increase market share against captives with greater choices to offer (and the stats bear out that this is happening).

So, auto market conditions are a mixed blessing, but on balance, good for good agents!  The one caveat I offer is, with increased commission income on existing business, comes the risk that prospecting for new business will get ignored and poor retention practices will get camouflaged.  I’ve seen this a lot over the years. It bears remembering, in our industry what goes up, doesn’t forever, it comes back down too.  Also, if you’re not growing PIF, you’re not really growing.

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