LexisNexis® Insurance Demand Meter Shows Record Growth as U.S. Consumer Auto Insurance Shopping and New Policy Growth Hit "Nuclear" Volumes for the First Time in the Same Quarter

Rhea-AI Summary

The LexisNexis® Insurance Demand Meter for Q2 2024 shows record growth in U.S. consumer auto insurance shopping and new policy volumes, both registering as 'Nuclear' for the first time in the same quarter. Key highlights include:

- 16.1% year-over-year shopping growth
- 19.5% increase in new policies
- Record 42.3% annual shop rate
- 21% of auto policies written in the last 12 months
- 38% growth in direct-to-consumer channels

Factors driving this growth include increasing auto and home insurance premiums, increased marketing by insurance companies, and consumers' heightened price sensitivity. The home insurance market's rate increases are also influencing auto insurance shopping patterns. Experts anticipate continued high shopping activity, despite potential impacts from the Summer Olympics and U.S. presidential election on advertising costs and effectiveness.

Positive

• Record 16.1% year-over-year growth in auto insurance shopping for Q2 2024
• 19.5% increase in new auto insurance policies for Q2 2024
• Annual shop rate reached a record 42.3%
• 21% of auto policies-in-force were written in the last 12 months
• Direct-to-consumer distribution channels grew by 38%
• Captive agent and independent agent channels grew by 2.4% and 8.9% respectively

Negative

• New policy volumes slightly decreased from May to June 2024
• Anticipated increase in media advertising costs due to Summer Olympics and U.S. presidential election

Insurance Market Analyst

The record-breaking 16.1% increase in auto insurance shopping and 19.5% growth in new policies for Q2 2024 signify a seismic shift in the U.S. insurance landscape. This "nuclear" growth is driven by rising premiums and increased carrier marketing, creating a perfect storm for policy churn.

The 42.3% annual shop rate is unprecedented, with some states exceeding 50%. This volatility presents both opportunities and risks for insurers. While it allows for market share gains, it also increases customer acquisition costs and potentially reduces long-term profitability if retention rates suffer.

The 38% growth in direct-to-consumer channels versus modest growth in agent-based channels indicates a significant shift in consumer preferences, potentially reshaping distribution strategies industry-wide.

Financial Analyst

The surge in insurance shopping and new policy growth presents a double-edged sword for insurers' financials. While increased policy sales can boost top-line revenue, the costs associated with acquiring new customers and potential underpricing risks could pressure profitability.

The fact that 21% of auto policies were written in the last 12 months suggests a significant turnover rate, which could impact long-term customer value and increase operational costs. Insurers will need to balance growth with risk management to maintain healthy combined ratios.

The correlation between home and auto insurance shopping trends indicates potential for cross-selling opportunities, which could improve customer lifetime value and operational efficiency for multi-line insurers.

Marketing Strategist

The "nuclear" growth in insurance shopping presents a golden opportunity for innovative marketing strategies. With a record 42.3% annual shop rate, insurers must focus on targeted, data-driven campaigns to stand out in a crowded market.

The 38% growth in direct-to-consumer channels underscores the importance of digital marketing and user-friendly online platforms. However, the continued growth in agent channels (2.4% for captive, 8.9% for independent) suggests a multi-channel approach remains crucial.

As media costs rise due to the Olympics and U.S. elections, insurers must optimize their marketing mix and explore alternative, cost-effective channels to maintain growth momentum without sacrificing profitability.

ATLANTA, Aug. 28, 2024  /PRNewswire/ -- For the first time since LexisNexis® Risk Solutions began benchmarking U.S. consumer auto insurance shopping, policy growth and channel trends more than a decade ago, both quarterly year-over-year shopping and new policy growth registered as 'Nuclear' on the LexisNexis® Insurance Demand Meter. Attributed to consumers motivated to shop amid increasing premiums for both auto and home insurance, along with increased marketing by insurance companies, the double-digit growth for both shopping and for new policies in force could portend a staggering amount of insurance shopping and new policies as the industry emerges from its profitability concerns in 2023.

Key Takeaways

• U.S. consumer insurance shopping clocked in at 'Nuclear' on the Insurance Demand Meter, as the quarterly year-over-year shopping growth rate grew 16.1% for Q2 2024 (up from last quarter's 2.9% increase).
• Quarterly year-over-year growth for new policies is also "Nuclear," with a 19.5% increase for Q2 2024 (up from 8.7% last quarter).
• By the end of Q2, the annual shop rate had risen to a record 42.3%, led by four states with annual year-to-date shop rates over 50% (Texas, Fla., Ga., Ariz.).
• At the end of the quarter, 21% of the auto policies-in-force were written in the last 12 months.
• Carriers reinstated marketing and new business lead purchasing in Q2 to take advantage of rate-driven shoppers that included both non-standard and long-tenured customers. Direct-to-consumer (non-agent based) distribution channels grew 38%, while captive agent and independent agent channels grew 2.4% and 8.9%, respectively.
• New policy volumes dipped slightly from May to June, causing shopping growth to outpace new policy growth in June for the first time since April 2023.

Dual Impact: Home Insurance Shopping Influences the Auto Market
With more than half of auto insurance shoppers owning a home or condo, rate increases now taking effect in the home insurance market are helping fuel shopping and switching for many consumers. LexisNexis Risk Solutions analysis based on S&P insurance rate filing data suggests that home and auto market rates have increased similarly for the past 12 months[i]. Shopping frequency patterns for both home and auto insurance consumers have also followed a similar trajectory. In fact, a recent LexisNexis Risk Solutions consumer study[ii] found that nearly four in 10 respondents with an existing home insurance policy are shopping for their insurance regularly.

"In 2023, we highlighted that certain regions or states, such as Texas, could serve as a potential bellwether for the rest of the country after its implementation of increased marketing expenditures and rate adjustments netted a profitability outcome. At present, it is evident that other regions took notice and capitalized or are capitalizing now on that same window of opportunity," said Chris Rice, vice president, strategic business intelligence, LexisNexis Risk Solutions. "Consumers, for their part, have shown a heightened sensitivity to price and predisposition to combined personal line shopping that could give carriers an opportunity to capitalize further."

Looking Ahead
After two years of stagnant growth in the number of policies-in-force, the second quarter of this year's increased shopping and purchasing activity approaches near-historic levels. Despite possible fluctuations in shopping levels, recent trends indicate that new policy growth could maintain record volumes through the next quarter.

"We anticipate that the convergence of the Summer Olympics and the U.S. presidential election will drive up the cost of media advertising while diminishing its effectiveness, potentially leading to a slowdown in consumer activity related directly to advertising," said Rice. "However, given the anticipatory action from carriers regarding marketing efforts this quarter, matched by the positive consumer reception, there is reason to believe that heightened shopping activity will continue."

Download the latest Insurance Demand Meter.

LexisNexis Insurance Demand Meter
The LexisNexis® Insurance Demand Meter is a quarterly analysis of shopping volume and frequency, new business volume and related data points. LexisNexis Risk Solutions offers this unique market-wide perspective of consumer shopping and switching behavior based on its analysis of billions of consumer shopping transactions since 2009, representing nearly 90% of the universe of insurance shopping activity.

About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data, sophisticated analytics platforms and technology solutions to provide insights that help businesses across multiple industries and governmental entities reduce risk and improve decisions to benefit people around the globe. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX (LSE: REL/NYSE: RELX, a global provider of information-based analytics and decision tools for professional and business customers. For more information, please visit www.risk.lexisnexis.com, and www.relx.com.

Media Contacts:
Chas Strong
LexisNexis Risk Solutions
Phone: +1.706.714.7083
Charles.Strong@lexisnexisrisk.com 

Dean Carney
Brodeur Partners for LexisNexis Risk Solutions
Phone: +1.646.746.5607
Dcarney@brodeur.com

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FAQ

What were the key findings of the LexisNexis Insurance Demand Meter for Q2 2024?

The Q2 2024 LexisNexis Insurance Demand Meter showed record growth in U.S. auto insurance shopping (16.1% year-over-year) and new policy volumes (19.5% increase), both registering as 'Nuclear' for the first time in the same quarter. The annual shop rate reached a record 42.3%, and 21% of auto policies-in-force were written in the last 12 months.

How did different distribution channels perform in Q2 2024 for auto insurance?

In Q2 2024, direct-to-consumer (non-agent based) distribution channels grew by 38%, while captive agent and independent agent channels grew by 2.4% and 8.9% respectively.

What factors are driving the increase in auto insurance shopping and new policies?

The increase is attributed to consumers motivated by rising premiums for both auto and home insurance, increased marketing by insurance companies, and consumers' heightened price sensitivity. Home insurance rate increases are also influencing auto insurance shopping patterns.

What is the outlook for auto insurance shopping and new policy growth in the coming months?

Experts anticipate continued high shopping activity, potentially maintaining record volumes through the next quarter. However, the Summer Olympics and U.S. presidential election may impact advertising costs and effectiveness, potentially leading to a slowdown in consumer activity related directly to advertising.