Auto coverage evolving as car manufacturers enter insurance marketplace

As traditional auto insurers compete against each other for customers, they’re now facing competition from new entrants in the auto insurance market. Some car manufacturers have begun offering insurance coverage that responds to the modern technology of today’s cars.

How can car manufacturers offer discounted premiums compared to large, sophisticated, and specialized insurance experts? Unlike the car industry, insurance rate calculations are a complex actuarial estimate of future costs, not an aggregation of known, fixed costs. The most consistently profitable insurance companies are the ones that excel at the advancement and refined use of technology and data analytics in underwriting, ratemaking, and claims handling.

Still, there are many ways car manufacturers may have an advantage over incumbent insurers. In this article, Milliman’s Elizabeth Bart examines the different elements that insurance premiums cover and how each could be reduced.