Rate increases on car premiums drive consumer purchases despite continued reduction in vehicle sales and Hurricane Ian Aftermath
ATLANTA, November 16, 2022 /PRNewswire/ — The latest edition of the LexisNexis® Risk Solutions Insurance Demand Meter reports that quarterly auto insurance purchases in the US increased 1.2% year-on-year in the third quarter of 2022, compared to -2.0% in the second quarter 2022, which marks the first quarter -quarter-on-quarter growth since the second quarter of 2021. The upward momentum occurred despite the fact that new vehicle sales remain low compared to annual trends pre-COVID and in late September due to Hurricane Ian a significant temporary drop in purchases was recorded. LexisNexis Risk Solutions® observed that much of the third-quarter purchasing activity occurred in states that were implementing rate increases in response to an increase in claims costs that started in the second half of 2021.
New contract growth increased by 3.9% in the quarter compared to -7.1% in the second quarter of 2022. Tariff increases are driving different consumer profiles to shop, which has led to this significant increase in new business volume from July (-3.0%) to +7, 0% and +7.9% in August and September respectively.
“We started Q3 on a July downtrend with the suppression of purchasing growth that we have seen since Q3 2021, but purchasing picked up momentum later in the quarter. August hit the record volume of 2020 and then surpassed it in September,” he said Adam Pichon, Vice President and General Manager of Auto and Home Insurance at LexisNexis Risk Solutions. “It is clear that rate activity in the auto insurance market is serving as a key catalyst in getting US consumers to shop, particularly in a handful of states where insurers have been able to quickly implement rate changes. In fact, we probably could have seen bigger increases in shopping were it not for Hurricane Ian and the devastation it wreaked Florida.”
Shopping even after the disastrous effects of Hurricane Ian
At the time of publication of the Insurance Demand Meter, Ian’s estimated insured losses are more than 60 billion dollars.1 Before the storm, Florida witnessed auto insurance purchases up 10% for most of August and September, including 13% higher in the week before the storm. The week Ian landed, shopping volume in Florida declined by 40%, which impacted the nationwide shopping volume by -6% in the following week.
“Unfortunately, given the density of affected areas and the destruction inflicted, these numbers are not surprising,” Pichon said. “Ian had a similar impact on shopping behavior seen in some of the other major storms that have made landfall in recent years.”
Rate increases reveal a variety of changes in consumer behavior
In the Q2 2022 edition of the Insurance Demand Meter, LexisNexis found a shift toward the middle-aged 25-55 demographic in shopping with the highest clip, and this trend continued in the third quarter, even as shopping growth across the board age groups increased. While all age groups were looking for lower premiums, each group primarily turned to independent brokers.
“The independent agent sales channel has shown the greatest volume growth over the past few quarters,” he said Chris Rice, Associate Vice President, Strategic Business Intelligence, LexisNexis Risk Solutions. “Just as consumers are shopping during these volatile times, so are independent agents seeking and advising those whose premiums have increased.”
The third quarter also saw two notable shifts in consumers:
“Some of these changes can be attributed to the growth of independent channel shopping, as agents can help customers buy from multiple carriers at the same time,” Rice said. “We also saw that many consumers were purchasing through non-independent agent channels. We believe this is likely the result of larger rate differentials in the market due to the timing of the recent rate increases, which has allowed more consumers to find lower rates with insurers who may not be as quick to respond to loss-making costs as their competitors.”
A look ahead
States in which insurers have already implemented rate increases, such as Florida, Georgia, Illinois and Texas are likely to continue to see increasing purchase growth in the coming months. But a number of other factors that could be affecting the U.S. auto insurance industry landscape could also play a role in whether shopping continues to rise or flatten out.
“It’s highly likely that certain states will see continued purchasing momentum, but we’re also tracking the ongoing impact of Ian, potential installment payments in many other states, and the potential for a rebound in new vehicle sales in the coming months,” Pichon said. “All of these factors will play a critical role in how we shop as we close 2022 and begin to look ahead to 2023.”
Download the latest Insurance Needs Meter.
LexisNexis Risk Solutions will provide additional information on the ongoing impact of Hurricane Ian on the US auto insurance industry in its Q4 2022 Insurance Demand Meter.
About the LexisNexis Insurance Demand Meter
The LexisNexis Insurance Demand Meter is a quarterly analysis of purchase volume and frequency, new business volume, and associated data points. LexisNexis Risk Solutions provides this unique market-wide perspective of consumer purchasing and switching behavior based on its analysis of billions of consumer purchasing transactions since 2009, representing nearly 90% of the universe of insurance purchasing activity.
About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data and advanced analytics to deliver insights that help businesses and government agencies reduce risk and improve decisions that benefit people around the world. We provide data and technology solutions for a variety of industries including insurance, financial services, healthcare and government. Headquartered in the greater Atlanta area, Georgia, we have offices around the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information and analytics to professional and business clients. For more information, visit www.risk.lexisnexis.com and www.relx.com.
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1 https://www.reuters.com/business/insurers-stare-up-60-bln-hit-hurricane-ian-aig-chief-zaffino-says-2022-11-02/#:~:text=Nov% 202%20(Reuters)%20%2D%20insurers, catastrophe%20loss%20in%20US%20history.
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