ATLANTA — Drivers are shopping and switching auto insurance policies more than ever. Recent analysis of the U.S. auto insurance market by LexisNexis® Risk Solutions has revealed as much as 62% of policies are shopped off-cycle or outside the traditional renewal window. This increase in shopping activity can be credited in large part to how easy it is to shop insurance using carriers’ price comparison tools, mobile apps and websites that prepopulate with consumer data. With consumers empowered to shop for a better deal, it’s no surprise that 40% of U.S. auto insurance policies were shopped in the past year.
“Over the past decade, LexisNexis Risk Solutions has tracked auto insurance shopping behaviors. We’ve seen growth in the volume of consumers shopping their auto policies quarter, year-over-year,” said Adam Pichon, Vice President and General Manager, Auto Insurance, LexisNexis Risk Solutions. “If carriers don’t identify these behaviors and adapt their strategy to address these shopping and switching patterns, then they will struggle to retain their customer base.”
To complement LexisNexis Risk Solutions proprietary market insights, the company recently commissioned a national study of over two thousand auto insurance policyholders in order to better determine motivations for why consumers are shopping. The study respondents were classified into three categories based on their auto insurance shopping habits over the past year – recent non-shoppers, shoppers and switchers. The study found that half of those surveyed have shopped in the past year and one-in-five ended up switching carriers. While there were no significant demographic differences between the respondent groups surveyed for the study, there were shopping differences in how they research and purchase insurance.
Shopping Habits During Renewal Windows
The study also found that 72% of consumers are aware that they can shop and switch their insurance carrier at any time, supporting what LexisNexis Risk Solutions witnesses in actual shopping behavior – 62% of consumer shopping off-cycle. Recent non-shoppers are most likely to renew automatically with 38% reporting they renew immediately when they get their renewal notice, and 27% saying they do so with little or no policy review. Shoppers on the other hand, are more likely to take their time, research their options and renew within 30 days of receiving their renewal notice. The vast majority of respondents, 70%, review both their price and coverage before renewing, which reveals that shoppers are highly engaged.
Price is King and Tops Loyalty
When it comes to insurance shopping, price was cited as the number one reason consumers decided to switch insurance carriers. And the price difference doesn’t have to be significant; a savings of $100 or less was enough to incentivize 45% of all switchers across income levels. Even if a carrier offers a competitive price this year, it doesn’t mean the customer will remain loyal. Half of shoppers in the study told us that they expect to shop again in the next year with one-in-five expecting to switch carriers when they do shop.
“Given the competitive market, how can carriers retain their current customer base? Proactively anticipating upcoming life events can prove to be a key differentiator,” said Ian Griffin, Director, Acquisition & Retention, LexisNexis Risk Solutions. “Communicating with customers at the appropriate time with the right information is key to further strengthening customer loyalty.”
Carriers Need to Anticipate That Life Happens
According to the study, more than 60% of shoppers experienced a life event within the past year and, of that group, half claimed it affected their decision to shop their auto insurance. Life events that generally have the most influence on auto insurance shopping include: adding or removing a driver, buying or leasing a new vehicle, decreasing household income, buying a new house, getting married or divorced, and moving.
While price is a primary motivation for consumers to shop and switch, carriers have an opportunity to use what they know about a customer’s life events to proactively engage and retain valuable customers before they shop. With 65% of consumers expecting a life event to occur within the next one to two years, now is the time for carriers to review their book of business and proactively monitor and anticipate when customers are most likely actively shopping.
For more information, download the LexisNexis Insurance Shopology white paper.
About LexisNexis Risk Solutions
LexisNexis Risk Solutions harnesses the power of data and advanced analytics to provide insights that help businesses and governmental entities reduce risk and improve decisions to benefit people around the globe. We provide data and technology solutions for a wide range of industries including insurance, financial services, healthcare and government. 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 and analytics for professional and business customers across industries. For more information, please visit www.risk.lexisnexis.com and www.relx.com.