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As auto insurance premiums rise, consumers dropping insurance to pay other bills

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Auto insurance premiums are still on the rise leading consumers, now more than ever, to continue shopping for better deals, according to J.D. Power and TransUnion.

“[C]onsumers are not relenting in their desire to find a more attractive premium for their auto insurance needs,” the Q2 2023 loyalty indicator and shopping trends (LIST) report states. “The second quarter of 2023 marks the highest shop rate we have recorded in now three years of tracking auto insurance shopping on a daily basis, at 12.5%.”

However, nearly 15% of respondents to a recent TransUnion survey said they own or use a car without valid insurance or allowed their coverage to lapse. Nearly 30% cited the inability to pay for coverage as the primary reason for not having insurance.

“When surveyed on how the increase in insurance premium has played out in comparison to other expenses within a household budget, it is not the largest felt increase in order of magnitude,” said Michelle Jackson, TransUnion personal lines market strategy senior director. “However, as costs continue to rise, some consumers are forced to make decisions on which bills to pay, and insurance ranks behind mortgage/rent, vehicle payment, credit cards, and utilities in terms of priorities.”

The report also notes there was a big drop from May to June in insurance shopping from 12.8% to 12.1%, perhaps a sign that consumers are growing tired of looking for better premiums. Switching remained at 3.9% this quarter, as it was in Q1.

At the regional level, quarterly quote rates were up in the Northeast and Midwest, flat in the South, and down in the West.

Homeowners with two cars and two drivers comprise the largest portion of households and tend to be the least price sensitive, according to the Q2 LIST report. Most are Boomers followed by older Gen Y (Millennial) policyholders. Of those households, policyholders ages 26-34 view price as the most important aspect of insurance satisfaction — at all income levels, according to J.D. Power.

Next, ages 35-54 are split up by income level. The higher the income the more likely great customer service is most important; the same goes for ages 55-70. The younger age group of the two that fall in the middle income range prefer good claims experiences.

Middle- and high-income customers over 71 years old prefer good claims experiences.

Renters tend to be the most likely to shop and switch, and are most likely to say they intend to switch in the next 90 days.

During the quarter, Allstate, Farmers, GEICO, Liberty Mutual, Nationwide, State Farm, Travelers, and USAA lost the most business to Progressive. On the other hand, Progressive lost the most business to State Farm.

J.D. Power and TransUnions’s Q1 LIST report found that GEICO, for the first time since the reports have been released, didn’t have the highest number of new customers who switched from other carriers.

From the insurer perspective, the American Property Casualty Insurance Association (APCIA) says auto insurance claims inflation has continued to rise faster than the underlying consumer price index (CPI), and claims are far outpacing premium increases.

P&C insurers’ premiums for personal auto increased 6% for the year compared to the 24% rate of escalating losses, according to APCIA.


Featured image credit: glegorly/iStock

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