For the first time in more than a year, overall growth in US auto insurance purchases registered as ‘cool’ in the LexisNexis Risk Solutions Insurance Demand Meter for the third quarter of 2023, continuing a downshifting trend that began in June.
The quarterly year-over-year shopping rate fell to -1.2% in Q3 2023 and fell from the 5.2% growth registered in Q2. In a recent report, the data analytics provider shared that the market has started to block the high market activity that started in August 2022.
However, LexisNexis reports that consumers are still buying in high volume in response to the ongoing rate hike. Quarterly year-over-year growth for new policies — the rate at which consumers switch or buy new coverage — was 3.9% for Q3 2023.
Although this was down from the 10.2% year-over-year growth in new policies in Q2, LexisNexis reported “record volumes” of new policies in August and September.
“This quarter’s Demand Meter reminds us that the industry is still recovering from important macro trends that are changing the auto insurance market,” said Adam Pichon, senior vice president of auto insurance and claims of LexisNexis Risk Solutions. “Continued rate increases and changing demographics continue to contribute to near-record purchase volumes, while claims severity continues to drive profitability challenges for insurers.”
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LexisNexis analysis shows an increase in shopping in the 65+ age group and a decline in younger age groups, especially those under 35 years old. Those 65 and older now make up 14% of new auto insurance policy purchases, LexisNexis said, up from 10% in early 2022.
New policy purchases for the under 35s fell from 40% to 35% over the same period.
“The key to explaining this demographic shift is the larger trend of household consolidation, which we first saw influencing insurance purchasing trends in Q2 of this year,” a press release said. “The average number of drivers per policy continues to increase, as parents add their adult children to their policies or adult children add to their retired parents.”
LexisNexis also reported that the percentage of purchases and new policy volumes associated with the purchase of a new or used vehicle are at a four-year low, even though sales have started to rebound from levels following last year’s microchip deficits.
Related: Personal Auto Insurance Struggles Easing Slower Than Expected: S&P
In Q3, electric vehicles (battery/plug-in hybrid/fuel cell electric vehicles) and hybrid vehicles increased to 1.4% of all new policy business. The number of purchases of electric and hybrid vehicles up to Q3 of this year has surpassed those from 2022.
“The increase in the recording rate frames the purchase of auto insurance and explains the new policy growth in the last quarters,” said Pichon. “As we close the year, claim frequencies remain flat and safety levels are above historical averages, due to high vehicle repair costs.”
He continued: “As these trends prevail, we expect continued rate increases and strategic retreats in the new year for some carriers, while those already moving towards profitability are likely to gain market share. .”
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