While industrywide auto insurance claim costs appear to be moderating, consumers continue to purchase policies at higher prices, according to TransUnion’s latest quarterly Insurance Personal Lines and Perspectives report.

The American Consumer Credit Reporting Agency found that the number of auto insurance shoppers increased 6.5% year-over-year in the second quarter of 2024. The company said this trend has been driven by rising insurance premiums in recent years, motivating consumers to shop for lower rates.

However, the consumer price index for motor insurance fell month-on-month for the first time since December 2021, falling by 0.2 percent between April 2024 and May 2024. “The slight shift could be a sign that insurers are moving closer to rate adequacy and that expected loss trends may be moderating,” the company said in a press release.

In May, S&P Global Market Intelligence reported that auto insurers posted a less-than-desirable combined ratio of 104.9 in 2023, but the result was about seven points better than the historically poor 2022. In July, Carrier Management reported that S&P GMI forecast a “dramatic return to underwriting profitability” for personal auto insurance, with S&P GMI forecasting a combined ratio of 98.4 for personal auto insurance in 2024.

According to a second-quarter consumer survey by TransUnion, while auto insurance purchase rates continued to increase in the second quarter of 2024, switching behavior remained relatively unchanged: only 40% of those looking for auto insurance switched providers.

On the real estate side, the total number of homeowners purchasing insurance remained higher in the second quarter than in previous years and similar to 2023, but overall activity was relatively unchanged, according to TransUnion’s report.

Declining traffic violations contribute to negative premium development

The company said its research also showed that there have been fewer traffic violations in U.S. states since the pandemic began, which insurers have used to price and underwrite risks.

“Due to the lower number of violations detected, car insurers received less money through additional premiums, thus contributing to a negative premium development,” the company explained.

TransUnion estimates that the declining number of traffic violations starting in 2020 will cost the auto insurance industry an estimated $200 million annually in lost premium revenue.

While there are differences in automated traffic enforcement reporting across states and inefficient sharing of violation information between states can present challenges, TransUnion reported that court records “provide a clearer view of violation activity and have more than four times as many out-of-service (OOS) violations as state MVRs (motor vehicle records).”

Topics
Car Profit Loss