This blog – originally posted in August 2018 – is being re-published with updated statistics for year over year industry-wide shopping growth rates.
When it comes to buying insurance, consumers today do not exhibit the brand loyalty of even a decade ago. Insurance companies continue to spend heavily on media (especially digital media), and carriers continue to focus on making it easier for consumers to get a quote through websites, mobile apps and comparative rating sites. Consumers can shop and switch insurance quicker than ever before. By investing a modest amount of time online, on the phone or with their agent, consumers can reap rewards in the form of premium savings. Even long-tenured policyholders are following the trend and shopping their insurance more often than before.
As a trusted provider of data and advanced analytic solutions to 270 auto insurance companies, LexisNexis Risk Solutions has a unique market-wide perspective of consumer shopping and switching behavior, a macro view derived from the analysis of billions of consumer-shopping transactions since 2009.
Insurance shopping volumes have exhibited year-over-year growth in every quarter since LexisNexis Risk Solutions started tracking shopping data in 2009. From Q3 2014 through Q2 2016, the market averaged over 6.5% annualized growth. The growth then slowed for the next five quarters (Q3 2016 to Q3 2017) to just over 1.5%. Our most recent data analysis shows the numbers rebounded and continued to do so with all quarters, between Q4 2017 and Q4 2018, exhibiting average growth above 6%.
All of this movement begs the following questions:
- Are we seeing customers shop more?
- Are we seeing net-new shoppers enter the market and shop?
The answer to both questions is yes. Consumers who regularly shop their insurance continue to do so, but our analyses indicate traditionally stable segments shop to the point that only one in four households have not shopped their insurance in the last five years. In addition, within the last 12 months, almost 40% of households have shopped their auto insurance.
Increased shopping is not limited to certain segments. For example, longer tenured policies, such as those 6+ years old, are shopping at higher rates than ever before. Once considered a ‘shop-free zone’ and not at risk of comparison-shopping, these customers can no longer be taken for granted as being loyal. Our latest studies have shown that 21% of these policyholders switched carriers after they shopped.
So what is behind these statistics and what are some of the factors that drive growth in insurance shopping?
- Life events can encourage insurance shopping – for example, homeowners are 3X more likely to shop for auto insurance when they list their house for sale. One in four individuals that sell their home also shop their auto insurance within 45 days.
- Rate changes – insurers continue to raise rates, although at different degrees at different times. Factors contributing to the increase in rates include lower unemployment and gas prices, which increase the number of miles driven and the opportunity for more accidents 1. Distracted driving has also led to more accidents 2. Insurance repair costs have risen due to the continued growth in new automotive technologies, while at the same time injury-related claim costs have also grown significantly 3.
Viewing market dynamics through the lens of insurance shopping provides a unique perspective. Understanding what is happening at an industry level is important, but it is crucial for carriers to also understand what is happening within their own books of business. Uncovering potential blind spots and areas for concern, via a deep-dive analysis, can provide insights to carriers about what is happening within their books to help them better adapt their targeting and segmentation initiatives. Are the top-line industry trends being replicated within their walls or is something else happening? Often it is only by diving beneath the surface that opportunities can be uncovered.