The Impact of Inflation on Insurance Shopping

After lying mostly dormant for decades, inflation has returned with a vengeance and has had profound impacts on several industries, P&C Insurance being no exception. The rising costs of replacement vehicles, vehicle parts, medical claims, and essentially all other loss-related costs, have placed substantial pressure on insurers’ bottom lines as rate adequacy has rapidly become a challenge across the industry. Insurers have responded quickly, both by reducing the cost side of the profit equation (reducing ad expenditures, shuttering acquisition channels, etc.) and improving the revenue side of the equation (through a series of rate increases not seen in decades).

Beginning in Q4 of 2021, the industry quickly shifted from the premium relief efforts of 2020 to a hard market characterized by significant rate increases. Now, more than a year after these rate increases began in earnest, consumers have experienced at least one renewal cycle in which their insurer was taking rate, and many consumers have seen their insurance premiums increase as a result. As we noted in the J.D. Power 2022 U.S. Insurance Shopping Study^SM, these premium increases are “adding insult to injury” as consumers were wrestling with the effects of inflation in other areas of their lives for a year or more before seeing their insurance premiums increase at renewal.

Consumers are now taking action. Data from our J.D. Power Loyalty Indicator and Shopping Trends (LIST), which tracks auto and home insurance shopping on a daily basis, revealed that shopping for auto insurance increased in Q2 of 2022 (from an 11.1% rolling 30-day average to 11.8%) and more consumers cited recent rate increases as their main reason for shopping. After plateauing in Q3 (11.7%), shopping increased again in Q4 (12.1%) as even more consumers mentioned a recent rate increase as their main reason for seeking auto insurance quotes. Early indications are that this renaissance of consumer shopping will likely continue into 2023.

This post is an excerpt from our paper The Five Forces Influencing P&C Insurance Shopping. Make sure you're on our mailing list to get a copy delivered to your inbox.

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The latest shopping intelligence is only a few weeks away. The 2023 U.S. Insurance Shopping Study publishes to subscribers on April 25.