The annual US auto insurance shopping growth rate decreased to -3.9% in the third quarter, according to the latest edition of the LexisNexis Risk Solutions Insurance Demand Meter. New policy growth also hit a two-year low, falling to -7.3% during the quarter.
While negative growth rates have been unusual over the past decade, decreases in new business policy growth were part of a downward trend that began in May and June, according to LexisNexis.
“Insurance shopping in Q3 returned to levels that compare to 2019 and years prior rather than following the usual trends of 2020,” said Adam Pichon, vice president of personal lines insurance at LexisNexis Risk Solutions. “Prior quarters this year were fueled by consumers returning to normalcy, but that pattern was tempered by macroeconomic and carrier-driven factors that began impacting the market in Q2 and carried over into the third quarter.”
More consumers remained with their current insurance carrier in Q3 than in previous quarters, compared to the same time last year, the report found. Several macro-and microeconomic trends drove the change, including:
- Global microchip shortages spurred new car inventory shortages, and rising costs for used cars meant fewer overall car purchases, which typically account for one in three auto insurance shopping events.
- With drivers returning to the road, claim frequency is up, which can lead to insurers filing for rate increases and cutting marketing spend to prop up profitability. In some states where regulators haven’t approved increases, decreased carrier marketing spend has been significant.
- State-issued moratoria on policy cancellations were lifted, which may have caused more consumers to keep their current policies.
Consumers also began leaving the auto insurance market in Q3 in higher volumes than in the previous four years, according to the report. This trend may have been influenced by the rate hikes and the car shortage, with policyholders who lacked collision coverage unable to replace their vehicles.
“Leveraging more than 10 years’ trends, we have seen the cyclical nature of insurance shopping trends,” said Chris Rice, associate vice president of strategic business intelligence, insurance, at LexisNexis Risk Solutions. “Consumers shop when they see their premiums increase, which often results from either a consumer experiencing a life event, such as purchasing a new home or vehicle or adding a new licensed driver, or a higher bill when their policy renews as a result of a claim, a traffic violation, or their carrier raising rates.”