Inflation pressure increases insurance rates to record levels, JD Power | Digital Insurance

An increase in inflationary pressures such as the rise in gas prices, the acceleration of extreme climate events and the soaring cost of manufactured goods have caused insurance rates to rise to record levels this year. 

This increase in the price of policies has led many consumers to leave their old insurance companies and shop for new policies, according to JD Power’s Loyalty Indicator and Shopping Trends (LIST) study. The study found an 11.8% jump in insurance quote rates across the nation, with 3.6% of consumers surveyed switching insurance companies from Q1 to Q2. JD Power partnered with consumer credit reporting agency TransUnion to gauge consumer loyalty among insurance firms.

According to the TransUnion survey, Progressive and USAA were the biggest losers during Q2, with both companies losing the most consumers to industry rival Geico. The shift from insurance providers like USAA to cost-centric insurance companies like Geico showcases that consumers are more interested in companies that can provide competitive prices rather than other factors such as comprehensive coverage. 

Insurance companies across the property and casualty sector have taken notice of this shift in consumer shopping behaviors. Now more than ever, companies are competing to lure customers away from competitors, offering deep discounts that make it enticing for consumers to leave their old providers.

According to Martin Ellingsworth, executive managing director of global insurance intelligence at JD Power, the trend of moving away from legacy providers has led insurance companies to fight over a new pool of potential customers.

“Most insurers give you longevity discounts if you’ve been a customer for a long time. Now, companies are coming up with anti-retention discounts. They’ll say, ‘I’ll make it easy for you. If you’ve had insurance for 10 years or more, then we can pull you away from wherever you thought you were entrenched.’” 

Cost-centric shopping has also led consumers to turn increasingly towards usage-based insurance programs. 

According to LIST, there has been a “steady increase in adoption [in UBI], particularly by those in the lower self-reported credit tiers.” 

“Inflation drove a 33% surge in auto telematics adoption in Q1 of 2022, with the number of customers offered a policy where telematics would monitor their driving and determine rates rose from 32% to 40% — and those who opted in [to UBI] increased from 49% to 65%,” according to the study. 

Michelle Jackson, senior director of personal lines market strategy at TransUnion, believes that consumer apprehension towards telematics and usage-based insurance may be a thing of the past. 

“Consumers are shopping for lower premiums, better coverage, and superior service from their insurer. [Nowadays] more consumers are warming to the idea of using a telematics tool to enhance safe driving, while also lowering costs.”