Auto Insurance Shopping Elevated As Loss Costs Potentially Moderate

As industrywide auto insurance loss costs appear to be moderating, consumers continue to shop policies at elevated rates, according to the latest quarterly Insurance Personal Lines and Perspectives report from TransUnion.

The American consumer credit reporting agency found that the number of auto insurance shoppers increased 6.5% year-over-year during the second quarter of 2024. The company said this trend has been driven in recent years by increasing insurance premiums, which motivated consumers to shop for lower rates.

However, for the first time since December 2021, the month-to-month Consumer Price Index for motor vehicle insurance decreased — a 0.2% drop that occurred between April 2024 and May 2024. “The slight shift could signal that insurers are approaching rate adequacy and prospective loss trends could be moderating,” the company said in a press release.

In May, S&P Global Market Intelligence reported that auto insurers posted a less-than-desirable combined ratio of 104.9 in 2023, but the result was about seven points better than in the historically bad year of 2022. In July, Carrier Management reported that S&P GMI forecasted private passenger auto insurance “to make a dramatic return to underwriting profitability,” with S&P GMI projecting a personal auto 2024 combined ratio of 98.4.

Based on a second quarter TransUnion consumer survey, while auto insurance shopping continued to increase in the second quarter of 2024, switching behavior remained relatively flat, with just 40% of those who shopped for auto insurance switching providers.

On the property side, the total number of homeowners shopping for insurance remained higher than in previous years and similar to 2023 during the second quarter, yet overall activity was moderately flat, according to the TransUnion report.

Declining Traffic Violations Contribute to Negative Premium Trends

The company said its research also shows that beginning with the pandemic, states across the U.S. began issuing fewer traffic violations, which insurers have used to price and underwrite risks.

“Due to a lower number of violations issued, auto insurers have been capturing fewer dollars in surcharge premiums, thereby contributing to negative premium trends,” the company said.

TransUnion estimates the declining volume of traffic violations starting in 2020 has cost the auto insurance industry an estimated $200 million per year in lost premium capture.

While state variations in automated traffic enforcement reporting and inefficient sharing of violation information among states can present challenges, TransUnion reported that court records “offer a clearer view of violation activity, returning over four times the number of ratable out-of-service (OOS) violations compared to state MVRs [motor vehicle records].”

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Auto
Profit Loss