Jumping Auto Carriers

Historic rate increases in the auto insurance line are moving consumers to jump ship and switch carriers, according to a J.D. Powers recent report.

Shopping for auto insurance is now at an all-time high. The 12.1% shopping rate observed in Q4 2022 and the carrier switch rate (4.1%) are both record highs in the more than two years J.D. Powers has been tracking auto insurance shopping daily, according to the quarterly report conducted by J.D. Powers in collaboration with TransUnion.

Auto insurance shopping and premiums have been on the rise but advertising dollars spent by auto insurance carriers have declined.

As insurers have decreased spending in advertising, in some cases they have also closed acquisition channels to slow the growth of new, unprofitable business, J.D. Powers said. “As we see, consumers are out shopping more than in the past, entering a market that is more difficult to navigate and finding carriers who are not as interested in winning their business.” How this trend plays out in 2023 remains to be seen.

And while telematics adoption – “once hailed as the silver bullet for rising auto insurance premiums” – surged in early 2022, new data shows that trend is no more. Telematics adoption remained almost flat throughout the past year. TransUnion’s Annual Outlook survey showed that while 60% of consumers who were offered a telematics program opted-in to participate, nearly half (40%) of those who used a telematics program saw their rates increase anyway, which may hinder continued adoption.

“The value proposition of telematics is that consumers give up some sense of privacy or autonomy to provide insurers a demonstrably safe driving record in real-time,” said Michalle Jackson, senior directo of personal lines market strategy at TransUnion. “If they’re not seeing that translate into lower rates, or if their rates actually increase, some may not continue with the program.”

That’s not great news considering predictions that premiums will continue to rise.

The rising costs of vehicle repair and medical expenses, higher driving and accident rates, and the potential for more frequent natural disasters are top reasons that costs will rise even more in auto insurance, according to Insurify, a Cambridge, Mass.-based virtual agent. Insurify predicted in December that by the end of 2023, Americans will pay 16% more for car insurance than they paid for at the beginning of the year.