literature review on motor insurance

Profitability and Growth in Motor Insurance Business: Empirical Evidence from Germany

• Published: 01 August 2017
• Volume 43 , pages 126–157, ( 2018 )

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• Liselotte Maichel-Guggemoos 1 &
• Joël Wagner 2  

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Over recent years, the German motor insurance business has faced significant changes, including a growing importance of direct insurance offerings. Motor insurance products are offered by a wide range of insurers, with companies differing in terms of legal status, size, product portfolio, distribution strategy and operational efficiency. Furthermore, one distinguishes between two main products, namely motor third-party liability (MTPL) and motor own damage (OD). In our research, we analyse to what extent the characteristics of the companies can explain the premiums, the total claims costs and the operating expenses per contract in MTPL and OD. For our analysis, we use panel data of insurance companies, offering motor insurance products in Germany, for the years 2002–2014. The panel data provide almost full market coverage. In our study, we apply different statistical tests and multilinear regression models. We show that mutuals relate to lower premiums, lower total claims costs and lower operating expenses per contract when compared to listed companies. In addition, direct insurance companies get along with lower premiums and lower operating expenses per contract compared to traditional companies selling via agents or brokers. Furthermore, we find major differences related to the range of the product portfolio, the size of the motor business, the dominance of the motor business within the non-life business, and the calendar year. Our results are relevant to academics and practitioners alike and help to better understand the German motor insurance business.

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For more details on the explanatory power of each single variable see Tables  A1 and  A2 in the Appendix, where we have included the single regressions for each variable. In the results, we see the relevance of each of the variables. However, as can be expected the  \(R^2\) values of the single variable models are very low. In fact, one single variable will not be able to explain  \(PR^p_{i,t}\) ,  \(CL^p_{i,t},\) or  \(EX^p_{i,t}\) .

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Also for OD, attention must be paid to multicollinearity. The explanatory power of each single variable is displayed in Tables  A1 and  A2 in the Appendix, where we have included the single regressions for each variable.

A possible explanation could also result from the contract deductibles. Because of the smaller budgets of younger drivers, they could be more willing to sign a lower-priced own damage insurance policy with a relatively high deductible. This would have a weakening effect on premiums and on claims costs. Due to limitations in our data set we cannot include deductibles in our analysis. The effect of deductibles could also be a topic of future research.

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Liselotte Maichel-Guggemoos

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Correspondence to Joël Wagner .

Single variable regressions

Single variable regression models show the influence of individual variables. We define single regressions as follows:

Here  Y stands for the dependent variables  \(PR^p_{i,t}\) ,  \(CL^p_{i,t},\) and  \(EX^p_{i,t}\) and  X stands for the explaining variables  \(MU_{i,t}\) ,  \(DI_{i,t}\) ,  \(NL_{i,t}\) ,  \(MS^p_{i,t}\) ,  \(GR^p_{i,t}\) ,  \(CL^p_{i,t-1}\) ,  \(LG_{i,t},\) and  \(YR_{i,t}\) . Tables  A1 and  A2 show the results for MTPL and OD.

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Maichel-Guggemoos, L., Wagner, J. Profitability and Growth in Motor Insurance Business: Empirical Evidence from Germany. Geneva Pap Risk Insur Issues Pract 43 , 126–157 (2018). https://doi.org/10.1057/s41288-017-0053-4

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Received : 16 December 2016

Accepted : 07 March 2017

Published : 01 August 2017

Issue Date : January 2018

DOI : https://doi.org/10.1057/s41288-017-0053-4

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Please note you do not have access to teaching notes, automobile insurance fraud detection in the age of big data – a systematic and comprehensive literature review.

Journal of Financial Regulation and Compliance

ISSN : 1358-1988

Article publication date: 8 April 2022

Issue publication date: 2 August 2022

The purpose of this paper is to survey the automobile insurance fraud detection literature in the past 31 years (1990–2021) and present a research agenda that addresses the challenges and opportunities artificial intelligence and machine learning bring to car insurance fraud detection.

Design/methodology/approach

Content analysis methodology is used to analyze 46 peer-reviewed academic papers from 31 journals plus eight conference proceedings to identify their research themes and detect trends and changes in the automobile insurance fraud detection literature according to content characteristics.

This study found that automobile insurance fraud detection is going through a transformation, where traditional statistics-based detection methods are replaced by data mining- and artificial intelligence-based approaches. In this study, it was also noticed that cost-sensitive and hybrid approaches are the up-and-coming avenues for further research.

Practical implications

This paper’s findings not only highlight the rise and benefits of data mining- and artificial intelligence-based automobile insurance fraud detection but also highlight the deficiencies observable in this field such as the lack of cost-sensitive approaches or the absence of reliable data sets.

Originality/value

This paper offers greater insight into how artificial intelligence and data mining challenges traditional automobile insurance fraud detection models and addresses the need to develop new cost-sensitive fraud detection methods that identify new real-world data sets.

• Literature review
• Data mining
• Automobile insurance fraud detection

Benedek, B. , Ciumas, C. and Nagy, B.Z. (2022), "Automobile insurance fraud detection in the age of big data – a systematic and comprehensive literature review", Journal of Financial Regulation and Compliance , Vol. 30 No. 4, pp. 503-523. https://doi.org/10.1108/JFRC-11-2021-0102

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Average cost of car insurance for drivers on their parents’ policy

Average cost of car insurance for drivers on their own policy .

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Is Farmers Insurance a good insurance company?

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Based on our assessment, Farmers insurance might be a good choice if you don’t mind spending a little extra for robust coverage options. With its wide array of insurance products, Farmers may also be best for shoppers who prefer to keep their policies with the same company. On the other hand, policyholders looking for the cheapest rates may want to look elsewhere, as Farmers tends to have higher-than-average premiums. Additionally, Farmers’ digital service may be lacking, according to the 2023 J.D. Power U.S. Insurance Digital Experience Study. The best way to determine if Farmers is a good company for you may be to request a quote.

Farmers customer satisfaction

Although cheap insurance is a priority for many, price might not be your only consideration when shopping for new coverage. Bankrate’s insurance editorial team understands that customer satisfaction may be top-of-mind for some, so we look to various third-party scores to evaluate this important metric.

One way we gauge an insurance company’s customer satisfaction is through studies conducted by J.D. Power . Each year, this rating company scores and ranks insurance companies in several subject areas, like overall customer satisfaction, claims satisfaction and digital experience satisfaction using a “best of” number on a 1,000-point rating scale. Financial stability is also a valuable consideration. AM Best analyzes financial strength and creditworthiness which is a strong indicator of a company's ability to honor outstanding claims.

In every region that Farmers was included in the  J.D. Power 2023 U.S. Auto Insurance Study , the company fell far below average in terms of overall customer satisfaction. In fact, Farmers took last place in the Florida, Mid-Atlantic, Southeast and Southwest regions. However, regarding claims, Farmers scored above the industry average in the J.D. Power 2022 U.S. Auto Claims Satisfaction Study. This could indicate that while customers aren’t happy with the customer service, they are seemingly satisfied with how Farmers handles its auto claims.

Farmers customer complaints

How many customer complaints a company receives is also a good indication of how customers feel about its service. The National Association of Insurance Commissioners (NAIC) produces an annual complaint index report assessing the frequency of complaints lodged against insurance companies. The index employs a baseline of 1.0. Scores below 1.0 indicate that a provider had fewer complaints than expected for a company its size and vice versa.

According to the  NAIC , Farmers customer complaint score fluctuates between more and less than average depending on the year. In 2021, Farmers received fewer complaints than average but had slightly more complaints than average in 2020 and 2022. Since this NAIC index may conflict with customer satisfaction, as reported by J.D. Power, drivers who prioritize customer service may want to do further research on Farmers car insurance before making a decision.

Other Farmers tools and benefits

Personal auto insurance isn’t the only kind of vehicle coverage that Farmers offers. The company also provides insurance policies and endorsements across several additional insurance products.

• Recreational vehicle coverage : Farmers offers policies for motorcycles, boats, watercraft and collectible cars, as well as larger vehicles like RVs, motorhomes and travel trailers.
• TrueCar : Farmers car shopping service, TrueCar , connects car buyers with certified auto dealers across the country. By shopping with TrueCar, buyers are able to view a vehicle’s price and see if it is currently higher or lower than its current market value in their area.
• Life Compass : Farmers’ Life Compass feature allows you to complete a short quiz to help you understand which life insurance products may suit you based on your goals and financial situation. From there, you can request a life insurance quote online or bring the results to a local Farmers agent if you have more questions.
• Commercial insurance : Farmers provides businesses with a wide array of coverages including property, liability, commercial auto, workers’ compensation, commercial umbrella and group life plans.
• Financial products : In addition to its life insurance policies, Farmers offers customers an opportunity to invest through mutual funds, IRAs, college savings plans and annuities.
• Frequently asked questions about Farmers

How do you file a claim with Farmers?

Farmers makes it easy to file a claim, which is helpful since it can be a rather stressful experience. You can file a claim with Farmers by:

• Calling 1-800-435-7764, or 1-877-732-5266 for Spanish speakers
• Reporting the claim on the company’s online claims portal
• Filing the claim through the mobile app

To make the process go faster, have your policy number and pertinent information available. For auto and home claims, have contact information for any witnesses, pictures from the accident site or home damage, and be prepared to answer some basic questions about what occurred.

Does Farmers have a corporate sustainability program?

Social responsibility is a core part of Farmers’ Insurance culture, both to its employees and the wider community. The Farmers Family Fund was established in 2012 to help Farmers employees experiencing financial hardship, and has since provided nearly $2.5 million in grants. The company also encourages diversity and inclusion efforts, including sponsoring employee groups for a wide range of identities, backgrounds and ethnicities.

Outside of the company, Farmers focuses its efforts on supporting communities that have been impacted by natural disasters. Each of the four nonprofits that Farmers has partnered with — SBP, Team Rubicon, Operation BBQ Relief and National First Responders Fund — share a purpose in responding quickly to communities affected by catastrophes. Farmers also often organize giving campaigns and match employee donations to these efforts.

Why did Farmers stop writing insurance in some states?

Farmer stopped offering auto, home and umbrella policies in Florida and is limiting the quantity and location of new home policies it offers in California. Both states experience a high risk of loss due to extreme weather, such as floods and wildfires. Due to inflated rebuilding costs and projected increase in claim frequency, many carriers started to limit their exposure in areas of the country prone to catastrophic loss.

Can I pay for all of my Farmers policies at once?

Farmers policies that share billing account numbers can be paid simultaneously online. If your policies have different billing numbers, you must make separate payments. Farmers may be able to combine multiple policies under the same account number, so reach out to your local agent for assistance.

• Methodology

Bankrate utilizes Quadrant Information Services to analyze April 2024 rates for ZIP codes and carriers in all 50 states and Washington, D.C. Auto insurance rates are weighted based on the population density in each geographic region.

Bankrate utilizes Quadrant Information Services to analyze the latest rates in April 2024 for ZIP codes and carriers in all 50 states and Washington, D.C. Rates include the most recent approved rate changes filed by insurance companies that affect our profile. These revised rates are then weighted based on the population density in each geographic region so that policyholders can see the impact rates have in their areas. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:

• $100,000 bodily injury liability per person
• $300,000 bodily injury liability per accident
• $50,000 property damage liability per accident
• $100,000 uninsured motorist bodily injury per person
• $300,000 uninsured motorist bodily injury per accident
• $500 collision deductible
• $500 comprehensive deductible

To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2021 Toyota Camry, commute five days a week and drive 12,000 miles annually.

These are sample rates and should only be used for comparative purposes.

Age: Rates were calculated by evaluating our base profile with the ages 16-60 (base: 40 years) applied. Depending on age, drivers may be a renter or homeowner. Age is not a contributing rating factor in Hawaii and Massachusetts.

The rates for drivers ages 16-20 added to their parents' policy reflect the good student and driver's training discounts applied. The rates for drivers aged 16-20 on their own policy do not include the good student and driver's training discounts. Additionally, 25-year-old rates are based on the driver as a renter and 30+ on the driver as a homeowner.

Incidents: Rates were calculated by evaluating our base profile with the following incidents applied: clean record (base), single speeding ticket and single at-fault accident.

Quoted rates are based on 40-year-old male and female homeowners with a clean claim history, good credit and the following coverage limits:

• Coverage A, Dwelling: $150,000, $250,000, $350,000, $450,000, $750,000
• Coverage B, Other Structures: $15,000, $25,000, $35,000, $45,000, $75,000
• Coverage C, Personal Property: $75,000, $125,000, $175,000, $225,000, $375,000
• Coverage D, Loss of Use: $30,000, $50,000, $70,000, $90,000, $150,000
• Coverage E, Liability: $300,000, $300,000, $300,000, $300,000, $500,000
• Coverage F, Medical Payments: $1,000

The homeowners also have a $1,000 deductible and a separate wind and hail deductible (if required).

These are sample rates and should be used for comparative purposes only. Your quotes will differ.

Bankrate Score

Our 2023 Bankrate Score considers variables our insurance editorial team determined impacts policyholders’ experiences with an insurance company. These rating factors include a robust assessment of each company’s product availability, financial strength ratings, online capabilities and customer and claims support accessibility. Each factor was added to a category, and these categories were weighted in a tiered approach to analyze how companies perform in key customer-impacting categories.

Like our previous Bankrate Scores, each category was assigned a metric to determine performance, and the weighted sum adds up to a company’s total Bankrate Score — out of 5 points. This year, our 2023 scoring model provides a more comprehensive view, indicating when companies excel across several key areas and better highlighting where they fall short.

• Tier 1 (Cost & ratings): To determine how well auto and home insurance companies satisfy these priorities, 2023 quoted premiums from Quadrant Information Services (if available), as well as any of the latest third-party agency ratings from J.D. Power , AM Best and the NAIC , were analyzed.
• Tier 2 (Coverage & savings): We assessed companies’ coverage options and availability to help policyholders find a provider that balances cost with coverage. Additionally, we evaluated each company’s discount options listed on its website.
• Tier 3 (Support): To encompass the many ways an auto and home insurance company can support policyholders, we analyzed avenues of customer accessibility along with community support. This analysis incorporated additional financial strength ratings from S&P and Moody’s and factored a company’s corporate sustainability efforts.

Tier scores are unweighted to show the company's true score in each category out of a possible five points.

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Inside Business | All Virginia drivers must have car insurance by…

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Inside Business | All Virginia drivers must have car insurance by July 1 as state drops uninsured fee

A longstanding Virginia law is changing later this summer, and now uninsured Hampton Roads drivers will need to have car insurance by July 1.

For years, Virginia was one of just two states, along with New Hampshire, that did not require car owners to possess auto insurance, according to auto club AAA.

Car owners were required to pay $500 every year to register an uninsured vehicle with the Virginia Department of Motor Vehicles.

A fee system has existed since the 1950s, former state Sen. Frank Ruff said in an email. After listening to constituents, Ruff sponsored successful legislation last year to do away with the uninsured fee and require all drivers to have insurance.

“I agreed with them that it made no sense for someone that might have a record of bad driving to simply pay $500 when many good drivers were paying more,” Ruff said.

Those constituents included members of the Virginia Loggers Association, a trade group representing the state’s logging companies, said Ron Jenkins, the organization’s executive director.

In several cases, Jenkins said member truck drivers were involved in wrecks where another uninsured party was at fault. Even after taking those uninsured drivers to court, Jenkins said companies were having to absorb the costs of totaled tractor trailers, which can now cost between $200,000 to $250,000. A vehicle is totaled when the cost of repairs would exceed its value.

“It was not likely that our company owners could really get anything out of the uninsured motorists,” Jenkins said.

So, the organization asked Ruff to sponsor the legislation, which passed both chambers of the legislature with minimal opposition.

For the majority of Hampton Roads drivers who already have car insurance, the new law should not have a large impact, said Mark Friedlander, spokesperson for the Insurance Information Institute consumer advocacy group.

The organization estimates around 12.1% of Virginia drivers were uninsured in 2022. Even with the exemption, that uninsured rate is lower than the national average of 14%.

Additionally, Friedlander said the state will be increasing its minimum liability limits on Jan. 1., 2025 . The limits, or the minimum dollar amount covered by car insurance, will increase from $30,000 to $50,000 for injury or death of one person, from $60,000 to $100,000 for injury or death of two or more people and from $20,000 to $25,000 for property damage.

It will be good for drivers who are involved in a wreck they did not cause, Friedlander said, because they will be covered for more expenses related to the crash.

“Those are pretty significant increases,” he said. “They will be among the highest in the country.”

Drivers with the bare minimum insurance coverage might see rate increases, he said. For all insured drivers, the national average price of car insurance was up 22.2% in March compared with one year ago, according to the Bureau of Labor Statistics.

Ruff noted the law changes would not stop all motorists from driving without insurance.

“The changes will not do away with the need for uninsured riders on policies because there will always be those who break the law and drive without insurance as there always has been,” he said in an email.

Trevor Metcalfe, 757-222-5345,  [email protected]

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