Unprecedented Premium Increases Prompt US Motorists To Change Insurers

Increasing instances of dangerous driving behaviour, rapidly rising insurance premiums and lengthy repair delays are some of the challenges facing US motorists and insurers, according to LexisNexis Risk Solutions’ 2024 US Auto Insurance Trends Report.

“Auto insurers are navigating a dynamic and challenging market environment in 2024,” said Adam Pichon, Senior Vice President of Global Analytics, Insurance at LexisNexis. “For their part, consumers are displaying more unpredictable driving and policy shopping behaviour, and increasingly switching carriers to find better rates. It is crucial for insurers to balance market acquisition and retention with rate adequacy and utilise data-driven insights to help manage risk and maintain profitability to be set up for continued success as the market begins to soften.”

LexisNexis said major speeding violations are up 10 per cent from 2022 to 2023 (36 per cent since 2019), while minor speeding violations rose 16 per cent (15 per cent since 2019). Distracted driving across all age demographics increased 10 per cent from 2022 to 2023, with the practice more prevalent among younger drivers, especially Gen Z. From 2022 to 2023, violations for the age group increased by 24 per cent and 66 per cent compared to 2019 figures.

The study also showed that 46 per cent of respondents were frustrated by lengthy claims processes. The time required to settle a claim is the highest determinant of customer satisfaction, followed by the number of people and ‘touches’ needed to resolve the claim.

Insurers took an aggressive approach to profitability challenges with an unprecedented 14 per cent year-over-year rate increase in 2023, improving the combined loss ratio to 105 per cent, a seven-point improvement compared to 2022.

However, these elevated rate increases led to record insurance policy ‘shopping and switching’ levels. Shopping increased 4.7 per cent with many consumers switching carriers, driving new policies up 6.2 per cent. Consumer retention rates dropped from 83 per cent to 80 per cent, indicating there may be a need for insurers to focus on their existing portfolios and take steps to update their underwriting practices during 2024.

Differing driving experiences in electric vehicles contributed to higher and more severe claims than internal combustion engine vehicles. In 2023, claim frequency and severity for EVs were 17 per cent and 34 per cent higher respectively than traditional segments. Twenty-four per cent of new EV buyers shopped around for lower premiums in 2023, significantly higher than the 19 per cent of new private passenger vehicle buyers that shopped for coverage last year.

Claim severity, which has steadily trended upward since the pandemic, continues to challenge the insurance industry. Compared to 2020, bodily injury rose 20 per cent while severity as material damage increased by 47 per cent.

In 2023, more than a quarter (27 per cent) of collision claims were deemed total losses, requiring payouts and consumers to replace a vehicle or find alternate transportation.

Attorney involvement helped contribute to the rise in claims costs, with 51 per cent of claimants who hired an attorney receiving a higher settlement amount.

Additionally, from 2022 to 2023 the number of drivers within a policy increased by five per cent, pointing to changing risk profiles that may be overlooked during renewal periods and potentially indicating consolidation in households.