“Every generation needs a new revolution,” noted Thomas Jefferson, and in present times it seems that several revolutions are joining forces in the insurance world.

Executive Summary

Insurers looking to remain both competitive and profitable need to take a renewed look at their retention models. With a shrinking market and the high cost of acquiring new customers, forward-looking insurers should extend their retention strategy to new business and focus on writing policies with a high lifetime value.

The recent innovations of ridesharing and carsharing rapidly are changing the market for many insurers and policyholders and eventually may result in fewer insurable cars on the road. At the same time, the arrival of digital sales channels likely will make it easier than ever for policyholders to shop around for other options.

As these dynamic trends are emerging, in some ways the personal lines auto market itself appears to be shrinking. There are 40 percent fewer auto insurers today than there were 20 years ago, according to an analysis by Verisk Analytics that was based on data from SNL Financial. In that time, the industry has seen only modest increases in premium levels. The end result has been fierce competition among insurers to attract and retain the best policyholders.

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