Drop in Shopping Signals 'Cold' Q1, While
Increasing Claims and Related Profitability Challenges Could Heat
Up the Insurance Market
ATLANTA, May 25, 2022 /PRNewswire/ -- The latest edition
of the LexisNexis® Risk Solutions Insurance Demand
Meter reports the overall annual U.S. auto insurance shopping
growth rate, which includes shopping and new policies, dropped for
the third consecutive quarter for the first time since LexisNexis
Risk Solutions began releasing these quarterly metrics.
Shopping was down 4.8% in Q1 2022 versus Q1 2021 – compared to
-5.2% in Q4 2021 versus Q4 2020 – as the industry continues to
grapple with increased claims costs and a 16% decline in new car
sales from a year ago.
New policy growth declined 11% for the quarter versus Q1 2021 as
insurers scaled back marketing spend, and consumers were forced to
account for early dispersal of half of the child tax credit.
However, some of that decline year over year can likely be
attributed to the fact that Q1 2021 saw higher than normal seasonal
shopping, which was boosted by the final round of stimulus checks
from the Coronavirus Aid, Relief, and Economic Security (CARES)
Act.
"The auto insurance and automotive OEM industries are still
facing significant headwinds related to decreased marketing spend
by carriers, variables in tax refunds for consumers, and new and
used vehicle shortages, but I don't think it's time to sound the
alarm just yet," said Adam Pichon,
vice president and general manager, auto insurance, LexisNexis Risk
Solutions. "The market is still reacting to pandemic-related and
macroeconomic factors such as chip shortages, inflation, and labor
shortages, and carriers are responding to claims inflation
challenges by raising rates. Rate taking among carriers is expected
to continue through 2023, which will likely drive consumers back
into the insurance shopping market."
With Claims Severity Up, Carriers' Marketing Spend is
Down
As reported in last quarter's edition of the Insurance Demand
Meter as well as the newly released 2022 Auto Insurance Trends
Report, suppressed new vehicle sales persisted into Q1 2022 and
were down 16% from the year prior. This lack of automotive
inventory has also created a ripple effect in driving up used
vehicle prices. As a result of more vehicles on the road and the
aging car park, insurance claim severities have been on the rise,
particularly for total losses.
With an eye on profitability, many insurers have drastically cut
their marketing spendi. This is having a significant
impact, especially in the direct channel where corporate marketing
is critical to creating new insurance shoppers. LexisNexis Risk
Solutions analysis suggests shopping volumes are down 3% or more
due to reduced spend on direct mail marketing alone.
Uncertainty Swirls Due to Variances in Tax Return
Shopping
New shopping volumes for uninsured drivers who qualify for the
Earned Tax Creditii (EITC) and the Additional Child
Tax Creditiii were down in Q1 2022, as they were a year
ago during the same period. This marks a two-year divergence from
the typical pre-pandemic pattern we typically see in our data
during tax season.
While the early disbursement of the Additional Child Tax Credit
in late 2021 did not appear to have a significant impact on the
depressed shopping volumes among the uninsured segment, it did
impact the overall shopping volumes across all demographics.
Insurers Respond – and a Look Ahead
As expected, rate filings were a priority among carriers in Q1
2022, and that should continue for at least the next 18 months.
"Upticks in claim frequency and severity have forced the hand of
insurers to revisit rate adequacy," said Pichon. "We will continue
to keep a close eye on the auto insurance market's rate activity
and gauge whether it becomes a key catalyst for increased U.S.
consumer shopping when they see their premiums are higher."
Download the latest Insurance Demand Meter.
About the LexisNexis Insurance Demand Meter
The
LexisNexis Insurance Demand Meter is a quarterly analysis of
shopping volume and frequency, new business volume and related data
points. LexisNexis Risk Solutions offers this unique market-wide
perspective of consumer shopping and switching behavior based on
its analysis of billions of consumer shopping transactions since
2009, representing nearly 90% of the universe of insurance shopping
activity.
About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data
and advanced analytics to provide insights that help businesses and
governmental entities reduce risk and improve decisions to benefit
people around the globe. We provide data and technology solutions
for a wide range of industries including insurance, financial
services, healthcare and government. Headquartered in
metro Atlanta, Georgia, we
have offices throughout the world and are part of RELX (LSE:
REL/NYSE: RELX), a global provider of information and
analytics for professional and business customers. For more
information, please
visit www.risk.lexisnexis.com, and www.relx.com.
Media Contacts:
Chas
Strong
LexisNexis Risk Solutions
Phone: +1.706.714.7083
Charles.Strong@lexisnexisrisk.com
Donna Armstrong
Brodeur Partners for LexisNexis Risk Solutions
Phone: +1.646.746.5611
mholman@brodeur.com
i https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/geico-progressive-break-trend-slash-advertising-expenditures-in-2021-69764365
and Q1 2022 Personal Lines Overview, Competiscan, ©2022.
ii
www.eitc.irs.gov/partner-toolkit/basic-marketing-communication-materials/eitc-fast-facts/eitc-fast-facts
iii
www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income-tax-credit-statistics
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SOURCE LexisNexis Risk Solutions