107.2% combined ratio for commercial auto in 2024.
25% tariff on most imported vehicles and parts in 2025.
Short-termism: a focus on short-term results in the detriment of long-term growth.
The insurance industry is no stranger to economic volatility, and with $90 billion in annual imported auto parts coming into the U.S., tariffs are likely to compound the cost problem that results in higher claim severity.
Read the 2025 SambaSafety Driver Risk Report: Current Trends Shaping Roadway Safety
This economic landscape is problematic, at best, for commercial auto insurers, which have continued to lag in the effort to improve their outlook for profitability. Faced with rising claim severity, inflation and unpredictable repair costs, many insurers default to short-term decision-making over long-term strategic investment to stay afloat.
While this short-term thinking may be necessary in moments of economic volatility, it could undermine an insurer’s profitability and resilience in the future.
We explore the psychological basis behind short-termism and why it may be a risk to commercial insurers in their efforts to drive down loss costs. We’ll also share how data-driven strategies can shift decision-making to create value and resiliency regardless of economic uncertainty.
How the Brain Handles Uncertainty
Stay with us here, but before we dive into the hidden costs of short-termism, we have to explore why short-term thinking becomes more dominant during economic stress. Neuroscience gives us a compelling window and necessary background into the phenomenon of short-termism.
Ness Labs highlights that our brains, wired to reduce uncertainty, often see volatility as threatening our survival. However, the more we know, the more equipped we are to make decisions that shape our future.
During times of uncertainty, the brain activates two key areas: the amygdala and prefrontal cortex. Here’s what happens behind the scenes—
- The amygdala, the brain’s alert system and emotional center, fires up when faced with the unknown and plans for any potential surprises.
- The prefrontal cortex of the brain helps make sense of uncertain situations and helps plan for the next move in the most logical way.
These two areas of the brain work together through the hub of the brain, the thalamus, to create a dialogue between your emotional and rational responses.
With this thinking, it’s fair to assume that while under pressure to perform in times of economic volatility, decision-makers may unconsciously prioritize immediate cost savings, such as reducing claims staffing or delaying tech investments, rather than prioritizing efforts that create long-term value.
Economic Conditions Amplify Neuro Shift
In today’s economic disruption, several influences in the commercial auto insurance market are ripe for these neurological responses to take hold. Our SambaSafety white paper, How Commercial Insurers Can Turn Economic Volatility Into a Competitive Opportunity, highlights these influences in depth.
- Inflationary pressures, hitting all-time highs following the COVID-19 pandemic, have made auto parts, labor and vehicle replacements expensive—raising the severity of claims and putting pressure on loss costs.
- The recent global tariffs, which remain at 25% for most imported vehicles and parts, and supply chain disruptions pose a significant risk to insurers because delays in parts and repairs extend claim durations and inflate expenses.
- Evolving workforce dynamics are rebounding from the pandemic, and talent is short to come by for insurers. The decline in Claims and Underwriting professionals paints a grim picture for the industry, which may see 21.5K job vacancies every year in the next decade.
- Regulatory pressure and legal trends add complexity that reactive strategies struggle to manage. In 2023, the nuclear verdict median peaked at $23 million—driving social inflation and placing undue pressure on insurers.
All of these economic pressures contribute to a market where short-term moves can feel appealing and necessary. Ultimately, however, they can hinder an insurer’s ability to stay competitive and profitable in the future.
The Cost of a Short-Term Mindset
In the face of economic pressures, it’s understandable that commercial auto insurers would default to decisions that address problems more quickly. However, it can often carry hidden or compounding costs.
When insurers delay investments in long-term solutions such as telematics or data that informs on driver risk, they risk falling behind on staying competitive with others who are building sustainable capabilities.
These solutions, supported by technology, help insurers reduce fraud, improve risk assessment and enhance operational efficiency.
Data infrastructure can be pivotal for insurers struggling with fragmented systems and soiled information. Without this investment, insurers are unable to identify emerging risks, price accurately or spot inefficiencies that can affect Underwriting and Claims teams.
Insurers are uniquely positioned to adopt a forward-thinking mindset (literally) that shifts from “fight or flight” and asks the question, “What could we learn from this experience?”
This simple reframe and the willingness to embrace uncertainty can help transform anxiety into a curiosity mindset.
The Shift from Reaction to Resilience
Commercial insurers, experiencing consistent premium raises (10.4% reported in Q1 of 2025), have every opportunity to break the behavioral trap that prevents data-informed strategies from taking hold and improving their book of business.
What are some actions insurers can take? Our advice? Invest in data.
Our white paper outlines that a holistic view of data enables better decision-making across the entire policyholder lifecycle. Data can lead to better cost estimates, help forecast loss trends, dynamically score risk and improve Underwriting accuracy.
During economic volatility, data can identify early indicators that will confidently tell insurers that they’ll see an inflection point in frequency, severity or market pricing. When data is aggregated and easily visualized, it takes away the guesswork that can cloud judgment during times of uncertainty and enables leaders to model long-term strategic outcomes.
Data fosters resilience by providing auto insurers with a sharper, more focused picture of risk. That’s a long-term advantage worth pursuing.
Want to dive deeper? Download the full white paper on how economic trends have impacted the auto insurance market and how data can guide strategies for the future.
