The LexisNexis Insurance Demand Meter highlights vital trends impacting automotive insurers and consumers. The year 2024 has been an interesting period to observe regarding auto shopping trends. For the first time since the report’s inception more than a decade ago, both quarterly new policy growth and shopping activity registered as “nuclear.”
In the second quarter of 2024, U.S. consumer shopping rose a considerable 16.1% year-over-year, a substantial increase over the previous quarter’s 2.9% increase. As noted, new policy growth followed a similar meteoric trajectory, rising 19.5% in Q2 2024, up from 8.7% in the prior quarter.
By the end of the second quarter, the annual insurance shopping rate also rose to a record 42.3%, with four states (Texas, Florida, Georgia and Arizona) all exceeding 50%. Additionally, by the end of the quarter, 21% of the auto policies in force were written within the last 12 months.
This double-digit growth on multiple fronts, especially against the profitability-challenged backdrop of 2023, will be critical to observe for the remainder of the year.
Here’s what’s happening in the auto insurance market.
Insurance carriers refocus marketing campaigns toward rate-driven shoppers
After auto insurers saw substandard profitability throughout much of 2023, the industry reacted by cutting back marketing efforts and imposing underwriting restrictions, creating a shopping slowdown for nearly the rest of the year.
However, during that time, we noticed that certain regions, such as Texas, acted differently after their increased marketing expenditures and rate adjustments resulted in a profitable outcome. At present, it is clear that other regions have taken notice and are either already capitalizing on or currently taking advantage of that same opportunity.
As price-sensitive consumers responded, carriers boosted marketing and lead purchasing, with direct-to-consumer channels growing 38%, while captive and independent agent channels grew 2.4% and 8.9%, respectively.
Shopping volumes overtake new business
New policy shopping volumes have continued to surpass those of the past three years despite the dip observed in May-June. This dip, however, did result in shopping growth outpacing new policy growth in June—the first time in more than a year.
The dual impact of homeowners insurance shopping on auto insurance
With more than half of auto insurance shoppers also owning a home or condo, the accelerated rate increases in the home insurance market in 2023 and the first half of 2024 influenced shopping and switching behavior among many auto insurance consumers.
Just as home and auto insurance rates have followed a similar upward trend, so have the shopping patterns for both types of insurance.
An internal LexisNexis analysis to be published in the coming weeks found that nearly four in 10 respondents with existing insurance policies shop for new insurance regularly, with 38% shopping for auto policies at least once a year and 36% doing the same for home insurance policies.
Among surveyed homeowners, price is a key factor driving policy shopping, with rate increases being the primary reason (63%), followed by competitive offers or referrals (27%). Interestingly, 18% of consumers cited “shopping for auto insurance” as a reason for also shopping for their home insurance policy.
What’s in store for the rest of 2024?
After a record-setting quarter for shopping rates and the efficacy of reinstated marketing campaigns, carriers may face a potential challenge with respect to media advertising costs in the face of global events such as the recent Summer Olympics and the upcoming U.S. presidential election.
This could lead to a potential slowdown in consumer shopping activity for the remainder of the year.
That said, if the shopping-level activity shows any similarities to last year, recent market trends point to a similar potential for sustained consumer engagement and the continuation of heightened shopping activity.
– Chris Rice is the vice president of strategic business intelligence at LexisNexis Risk Solutions.
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