Ask an Arity expert: Auto insurance and telematics trends in 2025

New year, new auto insurance trends? While many industry trends from 2024 followed us into the new year, there are some timely topics that carriers should keep an eye on. To help navigate current and emerging shifts, Arity experts Henry Kowal, Joel Pepera, and Devin McLaughlin share their point of views for auto insurance and telematics in 2025.

Henry Kowal on driving profitable growth and accelerating telematics program adoption

What is a top focus area for auto insurers in 2025?

HK: For 2025, prevailing sentiment is that we will see carriers continue to focus on growth and ad spend to attract the record level of policyholders willing to swap brand loyalty for lower auto premiums. Last year, eMarketer reported that insurance was the only sector in the financial services to increase digital ad spend.

But this introduces potential risks, including growing “profitably” and retaining existing customers. Insurers most likely to effectively manage these risks are those that understand the value of utilizing telematics driving data across different points of the customer lifecycle and across their entire book of business.

What can the industry do to support broader adoption of telematics solutions among consumers?

HK: There’s an undeniable view that consumers stand to benefit from using their driving data, particularly for auto insurance – ultimately, to be priced in a fairer, more equitable way based on actual driving behavior.  

In 2025, I think we’ll see even greater strides taken to be even more clear and transparent with consumers. Beyond that, there’s also an opportunity to raise awareness and educate consumers on what their driving score is. How it’s collected, how it’s calculated, and how their data – when shared with their consent – can benefit consumers. To achieve widespread consumer understanding about their driving data and their score will require a concerted effort across the insurance industry.  

Joel Pepera on leveraging telematics to tackle extreme weather and reduce bias

Given the extreme weather patterns lately, what are the top strategies auto insurers could adopt in 2025 to better support storm-prone areas?

JP: Insurers have used alerting mechanisms in the past to encourage policyholders to move out of the path of storms, but perhaps there is an opportunity to use telematics and driving data to make this more sophisticated.  

For instance, target alerts, reminders, and outcalls to drivers who are still recording trips in the path of the storm or whose last trip ended in the path of the storm. Additionally, using aggregated driving data can help insurers be more sophisticated to assess the volume of policyholder vehicles present in storm-affected areas to aid in response planning and develop early estimates of loss.  

How can AI-driven telematics reduce bias in auto insurance pricing for underserved or high-risk areas?

JP: AI-driven telematics provides a comprehensive view of a policyholder’s actual driving risk, considering factors like hard braking and distracted driving that are within the driver’s ability to control. This enables insurers to more accurately and fairly assign insurance premiums based on actual risk, rather than relying heavily on proxies of risk – such as where someone lives.

In high-risk or underserved areas, where historical claims experience typically leads to higher prices, telematics gives safety-focused individuals the ability to earn a lower price by demonstrating their ability to drive safely.

Devin McLaughlin on navigating challenges for price-conscious consumers  

What are top challenges facing price-conscious insurance shoppers? What can they do to combat inflation and rising auto insurance costs?

DM: Affordability is the biggest challenge consumers are facing right now. Today, people are unable to afford vehicles so that they can get to work, drive their kids to school, go to the grocery store, etc.  

Even for the folks that can afford vehicles, the amount of debt they need to carry to reach a payment amount that is acceptable has skyrocketed in recent years. The average monthly car payment is between $500 – $700, and the average loan term is nearing six years.  

Out of those that are buying cars, some people are purchasing insurance to get a car off the lot but dropping it after, contributing to the one in seven drivers without insurance in the U.S. This puts all drivers at risk, knowing they may be part of an accident with someone that has no coverage at all to cover damages or injuries.   

There are a few ways consumers can insulate themselves from external factors impacting their rates:   

1. Enroll in a telematics-based program. These are programs that will help them access the best prices possible and find carriers that reward good driving habits.  
2. Shop around. While there are hundreds of auto insurance providers, it’s worth the time to do research and shop around online or over the phone for the best deal.  
3. Evaluate your existing coverage. It’s important for drivers to understand what coverage they have to insure their vehicle and passengers appropriately.  

Want to start off 2025 strong? Check out our brochure on how carriers can use telematics across their entire business to drive profitable growth.