Steering Toward Opportunity: Non-Standard Auto Insurance Turns a Corner

After navigating a rough road marked by volatility and unprofitability, the non-standard auto (NSA) insurance market is firmly on course for a resurgence. Recent trends signal a shift as improved underwriting results drive newfound profitability. AM Best’s private passenger nonstandard auto (PPNSA) composite reported a net underwriting income of $13M in the first half of 2024, a sharp U-turn from the $457M loss during the same period the previous year.¹ 

Amid this changing landscape, new opportunities are emerging for NSA insurers to further optimize operations and improve the policyholder experience. Payment solutions, in particular, are quickly becoming a strategic area of focus — paving the way for greater efficiency, sustainable growth, and stronger profitability.

A Map of the Current NSA Market

Non-standard auto insurance is a sector defined by its unique roadmap to success, requiring insurers to stay in the driver’s seat of innovation. Several trends are defining the path ahead, presenting both opportunities and challenges for the NSA market.

Improved Underwriting Results  

Leading indicators suggest that refined underwriting strategies and rate adjustments are beginning to gain traction. The combined ratio of the NSA sector for 2024 improved to 98.8 from 107.8 in 2023, a strong signal of better underwriting performance.² Insurers have been able to edge into this profitability by leveraging enhanced pricing models, data-driven insights, and more disciplined claim-handling practices.

A Dual Dose of Inflation  

Motor vehicle maintenance and repair costs rose 6.5% between December 2023 and 2024, according to the Bureau of Labor Statistics’ Consumer Price Index. By comparison, the ‘all items index’ rose less than half that amount, 2.9%, during the same period.³

While economic inflation inevitably drives up the cost of physical damage claims, social inflation — stemming from higher legal expenses and larger jury awards — adds complexity to liability claims. The median nuclear verdict rose to $44 million in 2023, up from a low of $21 million in 2020.⁴ However, precise mitigation strategies can work to throttle these combined inflationary factors.  

The Increasing Importance of Data  

Actuarial precision is more critical than ever. Research from data and analytics company Verisk shows a 70% increase in liability frequency, translating to 20% higher premiums in the non-standard auto segment.⁵ To gain a clearer understanding of risk, non-standard auto insurers are starting to harness specialized data, enabling informed underwriting and pricing decisions. Advanced analytics also is pivotal in deciphering customer behavior and optimizing operations.  

The Role of Payments in NSA Insurer Success

Payment solutions represent a critical lever for success in the NSA sector. A unified payment platform can help non-standard auto insurers gain a competitive advantage and fast track growth.

Offering Flexible Payment Solutions  

Many non-standard policyholders face irregular income patterns or financial constraints. Flexible, modern payment options allow NSA insurers to keep their operations running smoothly while meeting diverse policyholder needs — fostering trust and satisfaction. Alternate payment methods like Venmo and PayPal can provide a smoother route for underbanked and un-banked policyholders to pay premiums, while automated systems ensure card payments are processed compliantly via phone.

Improving Payment Success Rates

A robust payment platform can help NSA insurers maintain steady traction in protecting revenue. With Guaranteed ACH, insurers can significantly reduce payment returns, ensuring a more predictable cash flow. Additionally, chargeback protection mechanisms safeguard against disputed transactions, minimizing financial loss. Solutions like automatic card updater technology tackle the roadblocks of lost or expired cards, guaranteeing customer payment information stays up to date. These innovations not only secure revenue but also enhance customer satisfaction, enabling insurers to focus on growth.

Enhancing Operational Efficiency  

Given the inherently transaction-heavy nature of the NSA insurance market, streamlined payment processes are essential for staying on course. A unified, integrated payment platform can eliminate inefficiencies and redundancies to reduce the administrative burden of insurers. Standardized, insurance-centric workflows create efficient highways for faster payouts and a smoother overall experience for both insurers and policyholders.

Integrating Advanced Analytics  

Integrated payment platforms can offer a wealth of actionable data, helping insurers zero in on patterns in customer behavior. By leveraging these insights, companies can predict risks more effectively and fine-tune their underwriting and pricing strategies. These robust payments analytics pave the way for insurers to stay ahead of the curve, providing the tools needed to adapt as market dynamics continue to evolve.  

Accelerating Ahead in the NSA Sector

At One Inc, we specialize in helping you overcome industry-specific challenges to unlock growth potential. By leveraging our unified platform and ecosystem partnerships, we deliver a simplified and seamless payment experience for policyholders. With One Inc by your side, cloud-based digital payment success is achievable. Learn more.  

Sources:

1. AM Best – https://www3.ambest.com/ambv/sales/bwpurchase.aspx?record_code=349572&altsrc=23 
2. AM Best – https://www3.ambest.com/ambv/sales/bwpurchase.aspx?record_code=349572&altsrc=23  
3. Bureau of Labor Statistics – https://www.bls.gov/news.release/pdf/cpi.pdf 
4. Marathon Strategies – https://marathonstrategies.com/corporate-verdicts-go-thermonuclear-2024/ 
5. Verisk –  https://www.verisk.com/blog/do-you-have-the-right-tools-to-assess-the-nonstandard-auto-market/#_edn3