In the final quarter of 2023, the U.S. auto insurance market saw a record-setting surge in shopping activity, according to the latest findings from the LexisNexis Insurance Demand Meter, which showed key metrics pointed towards sustained rate increases, improved combined ratios and heightened consumer interest in shopping for better deals.
The report revealed both U.S. auto insurance shopping and the acquisition of new policies experienced positive year-over-year growth, reaching record volumes, and both registering as "Hot" on the Insurance Demand Meter.
"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, senior vice president, U.S auto and claims, LexisNexis Risk Solutions. "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."
The report shows several key takeaways, including a rebound in year-over-year shopper growth from -1.2% in Q3 to 4.7% in Q4, along with a rise in quarterly year-over-year growth for new policies from 3.9% to 7.0%. Despite challenges such as inflated vehicle repair costs and unfavorable reserve development, the market saw heightened activity, attributed partly to increased marketing efforts by insurers, particularly in the direct distribution channel.
Moreover, regional disparities in shopping growth were evident, with Western and Midwestern states leading the surge. Hawaii, West Virginia and Iowa were among the top-performing states for shopping growth, while others like Washington, D.C., Oklahoma and New York experienced negative growth.
Looking ahead to 2024, insurers are presented with an opportunity to seize market share, especially in the direct distribution channel, where factors like marketing expenditure and rate adjustments are stimulating increased shopping behavior. However, the window of opportunity may be temporary, urging insurers to adapt their strategies swiftly to leverage current market conditions.
"With profitability top of mind in 2024, we expect to see many insurers taking a closer look at their portfolios and in some cases re-underwriting certain policies," said Pichon. "This could yield continued increases in shopping as consumers seek the most affordable policies."
The LexisNexis Insurance Demand Meter provides a comprehensive analysis of consumer shopping and switching behavior, offering insights derived from billions of consumer shopping transactions since 2009, representing nearly 90% of the universe of insurance shopping activity.
Charts courtesy of LexisNexis Insurance Demand Meter.
