Continued downshift in shopping growth
parallels low point seen in Q2 of 2022, while new policies see
record volumes in August and September in response to continued
rate increases
ATLANTA, Nov. 27,
2023 /PRNewswire/ -- The latest edition of the
LexisNexis® Insurance Demand Meter reports the
quarterly year-over-year U.S. auto insurance shopping growth rate
declined to -1.2% in Q3 2023, down from +5.2% growth in Q2 2023 as
rate increases and tightening budgets continue to impact consumers.
New policy growth, or the rate at which consumers either switched
or purchased new coverage, was also down from last quarter (3.9%,
compared to 10.2% in Q2 2023), yet even with lower growth numbers,
August and September saw record volumes of new policies.
"This quarter's Demand Meter reminds us that the industry is
still reconciling with significant macro trends that have shifted
the auto insurance market significantly," said Adam Pichon, senior vice president of Auto
Insurance and Claims at LexisNexis® Risk Solutions.
"Ongoing rate increases and changing demographics continue to
contribute to near-record shopping volumes, while claims severity
continues to drive profitability challenges for insurers. The
combination of these trends has created a challenging environment
that has been the theme for insurers in 2023."
Insurance shopping slows but remains elevated, with
demographic shifts at play as consumers seek cost savings
For the first time since Q2 2022, shopping growth registered as
'Cool' on the Insurance Demand Meter, continuing a downshifting
trend that began in June. This trend does not come as a surprise,
as the industry begins to overcome the elevated market activity
that began in Q3 2022. While efforts by insurers to scale back new
business have helped suppress shopping rates, consumers are still
shopping at high volumes in response to ongoing rate increases,
which are projected to net out at over 14% on average for 2023.
A deeper dive into shopping trends uncovers continuing shifts in
demographics, with growth in the 65+ age group and declines in
younger age groups – specifically those under 35 years old. Those
65 and over now make up 14% of new auto insurance policy purchases,
up from 10% in early 2022, while new policy purchases for those
under 35 have dropped from 40% to 35% in that same period.
Key to explaining this demographic shift has been the larger
trend of household consolidation, which we first saw influencing
insurance shopping trends in Q2 of this year. The average number of
drivers per policy continues to grow, as parents add their adult
children to their policies or adult children add their retired
parents.
Electric Vehicles (EVs) comprise a growing share of new auto
insurance policies, even as new vehicle policies drop
As EV sales continue to rise, their proportion of new auto
insurance policies does, too. This quarter, Electric
(battery/plug-in hybrid/fuel cell electric vehicles) and Hybrid
vehicles rose to 1.4% of all new policy business, and purchase
volumes of Electric/Hybrid vehicles through Q3 of this year have
already outpaced those from 2022.
The growing EV trend is taking place despite the overall drop in
new policy volumes and shopping linked to new and used vehicle
purchases, which are at four-year lows despite the auto industry's
rebound from the 2022 microchip shortage and supply chain
crisis.
A Look Ahead
A constant theme from previous LexisNexis Insurance Demand
Meters has been the significant rise in claims severities over
recent years, and that trend looks like it should continue into
2024. Profitability challenges persist even after the
implementation of significant rate increases and strict
underwriting restrictions, so much so that insurers' financial
ratings have started to be downgraded. But these same rate
increases and strict underwriting restrictions are driving
consumers to shop their policies, and that now includes even
long-term customers who may have been out of the market for 10 or
more years.
"Changing shopping demographics and behaviors are likely to be
the norm thanks to tightening consumer budgets and ever-increasing
auto insurance premiums," said Pichon. "Claims frequencies continue
to hold steady, but with severity levels still well above
historical averages – largely fueled by high vehicle repair costs –
insurers remain focused on making key strategic decisions on
whether to implement additional restrictions or conversely look to
gain market share as they move toward profitability."
"As we enter the holiday season, insurance shopping activity
traditionally tends to slow," continued Pichon. "But
ever-increasing premiums, combined with tightening consumer
budgets, could lead to a change in traditional shopping
behaviors."
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. Except where specifically cited, all data herein
is LexisNexis Risk Solutions proprietary
data.
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:
+1.706.202.5813
Charles.Strong@lexisnexisrisk.com
Alex Jafarzadeh
Brodeur Partners
Phone:
+1.617.587.2846
ajafarzadeh@brodeur.com
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