Partnerships, collaboration, and trust matter now more than ever —
By Stephen Applebaum and Alan Demers —
Even as so much has changed so quickly, including the entire insurance, automotive and mobility ecosystem, market leaders and their long-time trusted partners are better positioned than ever to weather the storm, adapt and succeed.
These include auto insurers, agents, brokers, car manufacturers, dealers and the automotive aftermarket. The extended Auto Physical Damage supply chain with which they all interact includes roadside, emergency response, towing and temporary rental car service providers. Related and interdependent segments include connected services, telematics-based and other IoT and sensor-based programs.
But driven by sudden and dramatic changes in socio-economics, politics, technology, and consumer expectations, almost all of the historical financial models that applied for so long among the participants are suddenly unrealistic and unworkable but the relationships and partnership are more relevant than ever.
What all of this means is that entirely new set of business models, relationships, products, risk management and support services need to be developed, negotiated, and implemented. No small feat! What appears to be friction emerging between the various ecosystem participants is actually evidence of this transformation evolving. Furthermore, consumers are experiencing a new normal when it comes to insurance – higher premiums – less protection, and are cautious about making claims for fear of surcharges or worse. Collaboration between claim ecosystem players, in particular, is more important than ever and is being put to the test.
Auto Insurance Economy
One of the bigger industry segments that best illustrates these challenges and also presents many important new opportunities is the $390 billion US auto insurance segment. This “insurance economy” is comprised of thousands of supply chain participants and industry trading partners serving a common customer base of about 215 million insured motorists who are involved in ~22 million auto accidents annually.
Since 2022, as inflation drove up costs for all participants, auto insurers were among the first to recognize the need for aggressive rate increases. Early warning signs emerged with steep increases in auto body repair labor rates due to widespread repair technician shortages similar to numerous other service industries in the post-Covid era. Auto insurance premiums have increased 49% since 2019, resulting in 57% of auto insurance customers shopping for new policies in 2024. These increases drove auto insurance policy shopping to unprecedented heights and increased the already stiff competition for market share. In fact, more than half (57%) of auto insurance customers have actively shopped for a new policy in the past year, the highest shopping rate ever recorded by J.D. Power. Although rates are slowing in 2025, increases are still developing.
Inevitably, ecosystem participants also began to feel the pinch of increased costs of just about everything and started passing them up the supply chain, putting further pressure on all participants and reaching consumers.
Auto Physical Damage (APD) Ecosystem/Rental Car Coverage
The $250 billion APD ecosystem is a prime example of how symbiotic these segments are. And one critical subset of this ecosystem – Rental Reimbursement Coverage – is one that displays high relevancy and inter-dependency. It provides auto insurers, collision repairers and policyholders with temporary transportation while accident and theft claims are being processed. Surprisingly, according to recently published 2025 U.S. Auto Insurance Tends Report by LexisNexis Risk Solutions, only ~ 40% of eligible auto policies carry this relatively inexpensive and high-value coverage, which becomes obvious whenever a driver must pay out-of-pocket for a rental vehicle. The average duration of these temporary rentals is currently ~16 days and the average daily retail rate ~$61.50, totaling almost $1,000 out-of-pocket. Rental Car Coverage typically costs ~$30/year.
Total loss claims, which generate significant opportunities for lengthier replacement rentals have spiked to 29% of claims in 2024 from only 17% in 2018, according to LexisNexis Risk Solutions.
Now with almost 30% of collision claims ending in a total loss, carriers need to place an even greater focus on speed and customer satisfaction in this process, especially since our research shows that approximately 40% of vehicles with full coverage (liability and physical damage) opted to purchase rental reimbursement coverage. – LexisNexis Risk Solution
This rental car protection gap represents a particularly high value opportunity for auto insurers, agents and brokers to educate policyholders on the value of this protection and differentiate their customer care and service levels from competitors. Rising rental costs are also a call to action for insurers to adjust daily policy limits to match new market norms.
Despite alternative modes of mobility renting a car is essential during the repair process and a huge source of dissatisfaction expressed by policyholders when they learn so-called “full coverage” may not include this valuable protection. This scenario leads to poor claim experiences and often has downstream consequences in terms of customer retention rates.
Partnerships Matter More Than Ever
Recently, many of the same economic factors that caused auto insurers to raise premiums have begun to impact supply chain partners such as rental car companies. These incude an aging car parc, tariffs and higher vehicle acquisition costs, OEM production constraints, advancing vehicle technologies, higher repair costs, and evolving global economic conditions.
Adding to rental companies’ operating challenges is the marked reduction in claims filings which depresses rental car transactions and revenue. In addition to raising their deductibles, many consumers have opted to remove rental reimbursement coverage to lower costs, further contributing to a decline in rental transactions.
Business Model Opportunities
The changing marketplace also presents new opportunities in distribution. New channels such as direct to consumer, point of sale and embedded insurance are rapidly emerging with support from retailers seeking incremental revenues and greater customer engagement and digital forward consumers.
Hyper-personalized, parametric and episodic insurance products are also meeting consumer appetites and demand and delivering a more dynamic and flexible customer experience.
Products & Services Opportunities
Protection gaps have become much more visible as extreme weather events created unprecedented property damage which exposed extensive lack of coverage. Insurance to value calculation based on historical loss data is no longer relevant. Carriers who can address and cure these gaps will be tomorrow’s market leaders
The auto insurance market is out of sync as between carriers and consumers and new products are needed now. Telematics, usage-based insurance and shared value programs are one good answer but the industry needs to address several related hurdles including data ownership and control. Claim process designs must move from historical to realtime to predictive in order to maximize potential.
In general, we need to encourage the industry to shift from a repair and replace to a predict and prevent mindset.
Claims & Technology Opportunities
A large number of obvious opportunities between ecosystem partners exist but have not been aggressively explored or adopted for a variety of reasons.
- Data Privacy concerns need to be eliminated and obvious opt in/out choice need to be addressed, paving the way to unleash the transformative power of telematics
- Misaligned business models while sharing the same customer base has been a constant and is best assuaged with negotiated pricing agreements and a balance of containing mutually shared claim costs
- Real time accident management, emergency response, crash detection and e-FNOL could transform the auto insurance market and unleash compelling value and customer service and is minimally deployed
- Straight-through-processing of claims remains a challenging but enticing design model and platform providers integrated with cloud-based claims management systems may be getting closer to enabling it
- AI needs and deserves more careful, thoughtful exploration to unlock its seemingly unlimited potential
Partnerships, Collaboration & Trust Matter More Than Ever
Recreating a relevant new insurance economy will require all the trust and goodwill fostered by these relationships over the years. It is interesting to note that even in the midst of such extensive disruption, some values remain constant.
About the Authors
Stephen E. Applebaum, Managing Partner, Insurance Solutions Group, is a subject matter expert and thought leader providing consulting, advisory, research and strategic M&A services to participants across the entire North American property/casualty insurance ecosystem focused on insurance information technology, claims, innovation, disruption, supply chain, vendor and performance management. Mr. Applebaum is also a Senior Advisor to Waller Helms Advisors. WHA is the premier investment banking boutique focused on the crossroads of the Insurance, Healthcare and Investment Services sectors.
Stephen is a frequent chairman, guest speaker and panelist at insurance industry conferences and contributor to major insurance industry publications and has a passion for coaching, mentoring, business process innovation and constructive transformation, applying disruptive technology, and managing organizational change in the North American property/casualty insurance industry and trading partner communities. He can be reached at Stephen.Applebaum@gmail.com.
Alan Demers is founder and president of InsurTech Consulting LLC, with 30 years of P&C insurance claims experience, providing consultative services focused on innovating claims. After initiating and leading claims innovation at Nationwide, Demers collaborates in the forefront of InsurTech, partnering with insurance leaders, startups, design thinking experts and service providers to modernize personal, commercial and specialty claims.
As Vice President of Claims Innovation at Nationwide, Alan conceptualized a vision and road map to build next-generation claims, automating and digitizing claims experiences, progressing from inception through prototype testing. He served as a founding member of the Corporate Innovation Council and played a key leadership role in establishing goals, practices and an innovative culture at Nationwide.
Alan is an accomplished executive leader and has worked for two separate Fortune 100 insurance companies in a number of corporate, national and regional leadership roles among personal, commercial, non-standard and specialty lines claims. Prior to leading claims innovation, he served as head of claims for Nationwide’s commercial agribusiness and non-standard claims. Other noteworthy roles include: field vice president, regional claims officer and national catastrophe director, quality assurance director.
Alan began his career with Aetna as a claim adjuster and advanced to a corporate claim consultant, prior to joining Nationwide in 1995.
