Inflation drives auto and home insurance shopping: TransUnion

Personal lines auto and home shopping is increasing as insurers raise rates, according to TransUnion's quarterly Insurance Personal Lines Trends and Perspectives report. 

"There was a drop in shopping activity among riskier consumers in Q2 2022, partly due to insurers' reduced marketing spend; however, we saw a rebound in activity from that segment in Q2 2023. Lower risk consumers have been consistently shopping at higher rates for the past 12 months," said Stothard Deal, vice president of strategic planning for TransUnion's insurance business, in a news release.

TransUnion experts believe that there are two likely main factors that are influencing personal auto insurance shopping rates – higher premiums and a boost in new vehicle sales. The Bureau of Labor Statistics (BLS) reports that the Consumer Price Index (CPI) for motor vehicle insurance was 17% higher in June 2023 than from June 2022. The CPI increase between June 2021 and June 2022 was only 6%. 

Car shopping has gone up, however, despite the rising vehicle prices and insurance rates. J.D. Power's U.S. Automotive Forecast for June 2023 estimates a 23% increase in new vehicle sales year-over-year. 

Insurify's Mid-Year Auto Insurance Report reflects this sentiment – according to the insurtech's database of over 90 million car insurance quotes, the national average cost of auto insurance premiums increased from $1,428 in 2022 to $1,668 in the first half of 2023. There was also a 51% decline in the number of customers opting for full-coverage auto insurance, according to Insurify's data, and an 86% increase in the interest of drivers seeking liability-only coverage. The report cites inflation and the subsequent cost of auto parts, natural disasters and legislative changes as contributing factors to the jump in prices seen so far this year. 

As for homeowners insurance, shopping has decreased in comparison with the first quarter of 2023, though shopping is still high overall at 13% in the second quarter of 2023 compared to last year. Thirty-year mortgage rates are in the 7% range as of July 2023, and due to such high interest rates, mortgage originations have reached their lowest point since 2014, though limited inventory of homes in the market has led to only slight price decreases.

The current state of the housing market presents a challenge for Millennial and Gen Z consumers who are first-time home buyers. The TransUnion report suggests that these customers may search for homes in more affordable regions, which may include areas more prone to natural disasters. Others may choose to continue renting their homes, which can create an opportunity for insurers looking to attract customers for renters' insurance options. 

"It's time for insurers to start thinking about how to most effectively engage with their upcoming Gen Z customers," said Deal. "We know they are more likely to learn about new products and services from social media and appreciate receiving personalized offers."

According to projections from the TransUnion report, the industry will continue to react to financial and economic challenges for the rest of 2023. Some insurers are taking short-term loss mitigation actions, such as selling policies on a multi-line bundle, withdrawing from certain areas prone to loss or focusing on underwriting new business. Insurance shopping rates will likely continue to rise with rate increases, especially in the auto insurance market.