The 2023 LexisNexis Demand Meter was full of exciting news for the U.S. auto insurance industry as many U.S. auto insurers continue their journeys back to profitability. After an almost two-year post-tax season slump, shopping volumes in Q1 returned to pre-pandemic levels for car owners.
The auto insurance industry ended 2022 with strengthening U.S. auto insurance shopping volumes and double-digit growth in new policies.
New policy growth, or the rate at which consumers either switched or purchased new coverage, was up a staggering 17% for the quarter compared to Q1 2022 and increased from 10.2% growth in Q4 2022.
But what does this mean for the industry overall? Here’s what you need to know.
Rising insurance premiums mean continued consumer shopping
Car insurance rates increased by 14% from 2022 to 2023, increasing the national average for an annual full-coverage car insurance policy from $1,771 to $2,014, according to Kiplinger.
In addition to more shoppers hitting the market due to rising premiums, there also is an increase in shopping by consumers who receive the EITC. This is significant because more low-income Americans report having access to vehicles than they did a decade ago, according to Governing.
Senior drivers lead car insurance shopping
Consistent with last year’s findings, new policy growth is still being led by drivers 66 and older. In Q1, those 66 and older experienced 27% growth. This age group leads the United States in car buying, as on average, 62% of all new cars purchased in the United States are bought by drivers aged 55 to 75.
This demographic is followed closely by 36- to 45-year-olds, 46- to 55-year-olds and 56- to 65-year-olds, all tied at 21% growth.
Carriers, take note – this trend reinforces our finding from last quarter – that the age demographics that have not historically shopped at a high rate and were not likely to switch when they did shop are now shopping and switching at an accelerated pace — suggesting that opportunities exist for carriers to reach these age demographics in their marketing campaigns.
Geography determines consumer shopping habits
Although there is good news that shopping is ticking back up, claims severities are beginning to level out, and used and recently purchased vehicles are trending back to pre-pandemic levels, there are variations across the United States as shopping patterns differ from state to state.
Volumes were up 25% or more in eight states, with Texas seeing the most growth, while four states showed flat or negative growth, with New York coming in at a surprising -8%.
These differences can be attributed to many factors, such as the cost of living – states with a higher cost of living experience less growth. However, the primary driver of shopping is consumers receiving an increased renewal rate and choosing to shop.
What does the future hold for car insurance shopping?
On the heels of 2022’s high shopping volumes, there is a possibility that the second half of 2023 could see some moderation in shopping growth trends.
Multiple factors will be at play in the coming months as insurers keep a close eye on claims severity and frequency, the potential for changing economic conditions and the related impact on new and used vehicle sales. Still, in the near term, the industry can expect more rate-taking in Q2 from insurers, which could lead to continued shopping volatility.
Overall, suppose claims severity and frequencies continue to level out and economic conditions improve so that more cars become available for purchase and consumers have the means to do so.
In that case, the shopping growth pendulum may return to normal levels.
– Adam Pichon is the senior vice president and general manager of auto insurance and claims at LexisNexis Risk Solutions.
Resources & Methodology
- LexisNexis. “LexisNexis Demand Meter.” Accessed June 2023.
- Kiplinger. “Car insurance rates have surged.” Accessed June 2023.
- Governing. “Car ownership poverty.” Accessed June 2023.