LexisNexis Insurance Demand Meter Shows Continued Downward Pressure in U.S. Auto Insurance Shopping Patterns

Staff Report

Tuesday, August 16th, 2022

The latest edition of the LexisNexis® Risk Solutions Insurance Demand Meter reports that the annual U.S. auto insurance shopping growth rate, which includes shopping and new policies, dropped for the fourth consecutive quarter for the first time since LexisNexis Risk Solutions began releasing these quarterly metrics. Shopping was down 2.0% in Q2 2022 versus Q2 2021 as the industry continues to face significant headwinds, including rising claims costs forcing insurers to continue to implement rate increases in many U.S. states. On the consumer side, inflationary pressures and vehicle shortages are leaving many potential shoppers on the sidelines where they might have traditionally shopped their policies.

New policy growth declined 7.1% for the quarter versus Q2 2021 as insurers continued to scale back marketing spend, though this was an improvement from the 11% year-over-year decrease seen in Q1 2022.

"This confluence of factors – rate taking by carriers due to profitability concerns; a slowdown in marketing spend; consumers grappling with inflation and fewer dollars to spend; vehicle shortages and rising interest rates – these are compounding right now, leaving the insurance industry in a continued state of flux," said Adam Pichon, vice president and general manager, auto insurance, LexisNexis Risk Solutions. "We've seen a lot of consumers leaving the market due to affordability concerns, which means many of those uninsured drivers will eventually re-enter the market. But the question is when."

Identifying the Right Growth Targets Critical for Insurers

For the first time since the beginning of the pandemic, middle-aged consumers (35-46) shopped at the highest rate of any age demographic, likely due to inflationary concerns and rate increases at renewal. This comes on the heels of several quarters in a row of younger shoppers (16-35) leading the way thanks to Federal stimulus checks and tax filing deadlines being altered due to the pandemic.

"This middle-aged demographic is traditionally a profitable segment for insurers," said Pichon. "Even in these challenging times, carriers who are able to best target this age group stand to gain market share."

When Will Uninsured Individuals Return to the Market?

As carriers began requiring payments in the latter half of 2021 after COVID-related voluntary and state-issued moratoria on policy cancellations began to wane, volumes of consumers left the market – meaning they had dropped their policies between the first of one month to the next. Our data shows that this metric actually returned to the levels we have seen in previous years.

According to shopping trends data from LexisNexis Risk Solutions from the last 13 years, most of these consumers should eventually re-enter the market.

"The timing could very well stretch into 2023, something carriers will need to account for as they look ahead to the second half of 2022," said Chris Rice, associate vice president of strategic business intelligence, insurance, at LexisNexis Risk Solutions.

Shopping Expectations

In addition to questions surrounding uninsured drivers re-entering the market, other factors to keep an eye on for the next two quarters will be the effect of continued rate increases and an anticipated rise in car sales relative to recent quarters.

"Recently, shopping activity has started to slightly tick up after a slow start to the year and a very poor second half of 2021," said Pichon. "The first half of 2021 had extremely high new auto sales, which slowed considerably in the second half of the year, so we're now beginning to trend up slightly as we hurdle that low point. We do anticipate continued marginal improvement over the second half of the year, but sustainable growth is more likely to come later as more shoppers re-enter the market."