Coming off a three-quarter streak to prompt a “nuclear” reading on the LexisNexis Insurance Demand Meter, U.S. auto policy shopping volumes remained steady in the first quarter of 2025. However, growth slowed from the first quarter of 2024.
The quarterly year-over-year growth rate for auto policy shopping was “sizzling,” clocking in at 16% on the Demand Meter, down from 26% last quarter. Quarterly year-over-year new policy growth came in “hot,” registering 8.4%, which was down from the fourth quarter’s reading of 17.7%. At the end of the first quarter, 46% of policies in force had been shopped at least once in the previous 12 months.
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- Ten states had shopping growth rates of 20% or greater in the first quarter, including Hawaii (59%), New Jersey (43%), Washington (33%) and Massachusetts (31%).
- Six states had new policy growth rates of 20% or more in Q1, with Nevada leading at 39%, followed by New Jersey at 31% and New York at 30%.
- Policy retention rates have dropped five percentage points in the past three years, from 83% in 2022 to 78% in 2025.
First-quarter growth influenced by direct channel shopping
First-quarter growth was primarily influenced by direct channel shopping by consumers across all age groups. The direct channel led independent and exclusive channels with 34% year-over-year growth, and the non-standard segment continued its rebound ahead of the standard market with 30% growth.
The nonstandard rebound in the first quarter can be partly attributed to the influx of uninsured consumers hitting the market with tax refunds. Yet, while tax season helped bolster market activity, the shorter month of February tempered it.
Comparing 2025 activity to 2024’s leap year advantage, one fewer business day in the month meant policyholders had one less day to shop. While this did create a dip in auto policy shopping in Q1, plenty of areas throughout the country bucked that trend and boasted elevated shopping growth.
From a regional vantage point, activity looked strong, with 10 states seeing shopping growth of 20% or greater, including Hawaii (59%), New Jersey (43%), Washington (33%) and Massachusetts (31%).
New policy growth boosted by pre-tariff vehicle sales
While down from quarterly year-over-year records, new policy growth in the first three months of the year was strong.
March had substantial volumes, likely driven by post-tax refund activity and increased vehicle sales from consumers angling to get ahead of potential cost impacts from tariffs. As consumers who purchase new vehicles tend to re-evaluate, shop and switch their policies, this was likely another boost to activity driven by the economic landscape.
Six states had new policy growth rates of 20% or more in Q1, with Nevada leading at 39%, followed by New Jersey at 31% and New York at 30%.
Retention rates drop even among cohorts of loyal customers
Whether due to macroeconomic factors, rate increases or amplified marketing that followed the loosening of underwriting restrictions, policyholder loyalty is shifting.
Since 2021, the market has seen a significant drop in retention rates, which persisted into 2025. In early 2022, retention levels were above 83%. However, the surge in new policy growth has reduced retention levels to 78% at the end of Q1 2025.
As a result of the explosive shopping and switching over the past few years, policies today are churning nearly 30% faster than they were three years ago, resulting in an additional six million policies changing insurers annually compared to 2021.
What may be less evident to insurers isn’t that retention rates are dropping but rather that an outsized portion of the decline is coming from cohorts of historically higher lifetime value groups.
As record increases in new business fueled the market, consumers with a prior policy tenure of 10 years or greater and those aged 66 and older were particularly active.
These groups, which have traditionally contributed to lower growth than other cohorts, helped drive a considerable share of the overall increase in industry activity over the past three years.
While insurers should continue seeing ample opportunity to attract previously loyal, high-value policyholders, some may look up and realize that their own best customers are hitting the market, underscoring the need for a more robust retention strategy.
Seniors are the most active shopping demographic in Q1
Emphasizing their contribution to declining retention rates, consumers aged 66 and older continued to be the most active age group shopping the market in the first quarter of 2025. They solidified the top spot among age demographics, while growth was more evenly distributed among other cohorts.
The 66-plus age group saw a year-over-year growth of 19.7%, while 26- to 35-year-olds, who shopped their auto policies the least, grew 13.1% compared with their counterparts.
Older consumers on fixed incomes are likely more sensitive to rate increases, which has prompted this traditionally stable group to weigh policy options.
Looking ahead
Tariffs could have more of an impact later in the year, but that doesn’t mean consumers and insurers aren’t focused on them now. Insurers may see an acceleration in new vehicle and home material purchases as consumers race to beat the clock before the potential impacts of the tariffs are felt.
As carriers know, home and auto markets can follow a similar trajectory, so we may see each market fueling policy shopping and switching in the other.
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