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LexisNexis: Insurance shopping is up, limited time for insurers to win over most profitable customers

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LexisNexis Risk Solutions says its Insurance Demand Meter found a “sizzling” Q1 2024 for new insurance policy purchases, showing consumers aren’t resigned to higher rates.

U.S. consumer auto insurance shopping activity registered as “hot” on the meter, as quarterly year-over-year (YoY) shopping grew 2.9%, slowing slightly from Q4 2023’s 4.7% increase YoY.

The meter is a quarterly analysis of shopping volume and frequency, new business volume, and related data points.

While shopping has remained high throughout the first three months of this year, it hasn’t outpaced shopping growth from Q4 2023. With that in mind, Q2 2024 could serve as a litmus test as to whether the market could see a slowdown in shopping like last year or if there will be a shift in traditional consumer shopping behavior, LexisNexis said.

“Fewer large rate increases are being implemented by many insurers, but will traditionally loyal consumers now continue to shop, having realized there may be opportunities to save in the future? If so, this could present yet another shift in the shopping paradigm insurers must consider,” Pichon said, in the release. “Those insurers with a measured approach to acquiring the right new business and retaining their most profitable business stand poised to gain market share as the industry overall continues to climb back to profitability.”

The report states that looking ahead, “insurers may need to adjust their strategies to find the ‘sweet spot’ that balances acquisition appetite with rate adequacy to take advantage of the rate-driven shopping activity before it levels off.”

“Time will tell how long these windows of opportunity remain open, but if states on the forefront of positive-turned-negative shopping growth are any indication, insurers have time, but not infinite time, to take advantage of current market conditions,” LexisNexis says in the report.

J.D. Power reported earlier this month that notable auto insurance premium increases and “lackluster” customer satisfaction scores have led 49% of more than 10,000 consumers to shop for new policies in the past year.

Auto insurance increased by 2.6% in March from February and a 22% increase from a year ago. Auto repair costs increased 1.7%, up 8.2% in a year.

Yahoo Finance reported in April that auto insurance’s 22.2% annual increase is the largest since December 1976 when prices increased 22.4%.

Comparatively, LexisNexis found that quarterly YoY growth for new policies was “sizzling,” up 8.7% for Q1 2024 and up again from an increase of 7% last quarter. This was the seventh consecutive quarter and 20th straight month increase, meaning consumers continue to switch carriers at an increasing rate when they shop, LexisNexis concludes.

“This triggered policy switching in notable numbers in the final quarter of the year, sparking activity in what’s typically a quieter shopping period and bringing the year-over-year, annual new policy growth to 9.8%,” the report says.

Thirty-nine states saw positive shopping growth in Q4, and 15 of those states experienced double-digit growth, likely a result of both rate and marketing activity, the report states. In contrast, states like Texas showed growth early in 2023 and experienced a cooling off in Q4 as rate activity slowed, according to LexisNexis.

“As the industry sees rates spike and expands marketing to prime consumers for increased shopping, it will be key to observe activity on a state-by-state level,” said Adam Pichon, LexisNexis Risk Solutions global analytics senior vice president. “When we look at Texas, a leading state for improved profitability, both the number and size of rate increases have dwindled. While we can’t predict the shopping trajectory for states still looking to achieve rate adequacy, we will watch closely to determine whether Texas can serve as a bellwether for the rest of the country.”

Despite healthy shopping patterns for Q1 overall, March was the outlier with shopping growth falling slightly negative.

“Even as March saw a slightly lower shopping growth rate from the previous year — which may be attributable to fewer workdays and more weekends than in 2023 — 42% of insured households shopped in the last 12 months,” a LexisNexis news release states. “When comparing all years back to 2021, the consumers most likely to be retained by their existing insurance company, or those who have been loyal for 10-plus consecutive years, comprised less than 20% of the shopper pool. Through Q1 2024, this cohort has grown to 24% of total shoppers.”

Pichon added, “As we have seen more shopping in recent months from consumers who have traditionally been longer-tenured and more loyal, insurers with an appetite for growth may still have an opportunity to capitalize as these consumers seek to lower their premiums.”

“Insurers may also want to consider implementing stronger retention strategies as they seek to return to rate adequacy and profitability, including more proactive and selective monitoring of their renewal books to help identity and retain those loyal policyholders,” he said.

During Q1, growth in new drivers largely offset the number of those that left, bucking trends observed in 2022 and 2023 where a record number of consumers left the market in response to higher premiums.

During the quarter shoppers aged 66 and over looked for insurance at the highest rate because of the effect of higher premiums on fixed incomes, according to LexisNexis.

Tax season delivered a shopping boost as well when more uninsured consumers re-entered the market despite purchase rates remaining lower than historical averages for the uninsured population, according to the findings.


Featured image credit: glegorly/iStock

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