The insurance industry is once again in a race against rising costs. The on again, off again trade posturing across the globe – the uncertainty of tariffs on imports from Canada, Mexico, and China have a lot of folks wondering what’s going to happen. What will the impact be on the cost of replacement auto parts, particularly windshields, bumpers, and other key components? With insurers already facing profitability challenges, the question isn’t just how much volatility they can handle, but what can be done to be prepared no matter what the outcome?
Progressive and Allstate have already moved to integrate potential tariff-driven cost increases into their pricing models. Progressive CEO Tricia Griffith emphasized that the company’s pricing and economics teams are actively working to adjust rates to reflect these new realities. Major carriers are echoing this urgency, noting that rapid adjustments were key during the last inflationary cycle, and they’ll be essential now.
The reality for auto insurers? There’s no escape from rising costs. Replacement parts make up roughly 40% of total repair bills, and with imports accounting for a major share of auto parts, premiums will inevitably rise. But simply raising rates isn’t a sustainable strategy – especially in a competitive market. The key to managing these pressures isn’t just faster pricing adjustments, it is segment specific adjustment and better risk assessment/intervention before preventable losses even happen.
Fixing Flawed Risks is THE Sustainable Play
While carriers can adjust premiums to reflect economic shifts, a more fundamental approach is needed: finding and fixing flawed risks before they become losses. The most profitable insurers won’t just react to macroeconomic disruptions, they’ll actively shape a portfolio that can weather them. That means:
Detecting risk flaws at the application stage rather than relying on costly post-claim adjustments.
Using real-time data to find risk clusters and intervene early, before they result in high-severity losses.
Ensuring underwriting accuracy so that premiums reflect true risk, not just broad industry trends.
Unfortunately, most carriers’ core systems aren’t built for this kind of agility. Traditional underwriting platforms process transactions, but they don’t enable in-the-moment risk adjustments. That’s where idFusion comes in: allowing insurers to detect, analyze, and fix risk flaws in real time, without waiting on IT or lengthy system updates.
Building a More Resilient Portfolio
Consider an insurer detecting a rise in claims tied to a specific risk flag. Instead of waiting for rates to climb across the board, they use idFusion to pinpoint high-risk segments, apply targeted interventions, and adjust pricing with precision rather than broad increases. The result? A more stable, profitable book of business that can handle external shocks.
With tariffs adding yet another layer of pressure, insurers need more than reactive strategies. They need proactive risk management that turns flawed risks into good ones – before economic shifts force their hand. The insurers that succeed in the next decade won’t just be the fastest at raising rates. They’ll be the smartest at managing risk.
