U.S. Auto Insurance Shopping Growth Declines in Q3 2023


A shift in customer demographics is partly attributed to household consolidation, where parents are adding their adult children to their policies or vice versa.

The latest LexisNexis Insurance Demand Meter showed a decrease in the U.S. auto insurance shopping growth rate for Q3 2023. Following a 5.2% growth in Q2, the rate dipped by 1.2% in the most recent quarter, highlighting the challenges faced by consumers grappling with rate hikes and budget constraints.

"This quarter's Demand Meter reminds us that the industry is still reconciling with significant macro trends that have shifted the auto insurance market significantly," said Adam Pichon, senior vice president of auto insurance and claims at LexisNexis Risk Solutions. He pointed out ongoing rate increases and demographic changes continue to drive high volumes of insurance shopping, even as claims severity poses profitability challenges for insurers.

The report indicated a shift in consumer demographics and behaviors. There's been an increase in the 65+ age group's participation in the market, now accounting for 14% of new auto insurance policy purchases, up from 10% in early 2022. Conversely, purchases by those under 35 have declined from 40% to 35% in the same period. This shift is partly attributed to the trend of household consolidation, where parents are adding their adult children to their policies or vice versa.

A significant development in the industry is the rise of EVs in the auto insurance market. EVs and hybrid vehicles now comprise 1.4% of all new policy business. This increase comes despite a general downturn in new policy volumes and shopping linked to new and used vehicle purchases, which are at a four-year low.

Looking ahead, the report anticipates a continuation of rising claims severities into 2024, posing ongoing profitability challenges for insurers.

"Claims frequencies continue to hold steady, but with severity levels still well above historical averages---largely fueled by high vehicle repair costs---insurers remain focused on making key strategic decisions," Pichon said.

As the holiday season approaches, a traditional slowdown in insurance shopping activity is expected. However, Pichon suggested the trend might change due to increasing premiums and tightening consumer budgets, potentially altering traditional shopping behaviors.

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