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January 6, 2020

How to Thrive in Auto Insurance

Summary:

Carriers with data-driven solutions that anticipate key life events can engage consumers at the right time, in the appropriate context.

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When shopping for an auto insurance policy, consumers have greater access than ever to a quick and easy quote. Insurers continue to invest in improving the consumer experience, particularly the digital experience; a consumer can now get a quote from a mobile device while waiting in line at the grocery store! With the majority of insurers making improvements, it has become challenging for insurers to adequately compete for attention, let alone new customers.

The secret is to understand and execute on a strategy that aligns with the shopping and switching habits and preferences of today’s customers.

Shopping Habits During Renewal Windows

A 2019 analysis of the U.S. auto insurance market by LexisNexis Risk Solutions has revealed that as many as 62% of policies are shopped off-cycle or outside the traditional renewal window. At every consumer’s fingertips is access to a slew of carriers’ price-comparison tools, mobile apps and websites that prepopulate with consumer data to expedite the quote process. 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, and that 78% of policyholders have shopped their insurance within the past five years.

See also: 3 Reasons to Use Online Marketplaces  

To complement the LexisNexis Risk Solutions proprietary market insights, we recently commissioned a national study of over 2,000 auto insurance policyholders to better determine motivations for why consumers are shopping. The respondents were classified into three categories based on their auto insurance shopping habits over the past year – recent non-shoppers, shoppers and switchers. There were significant shopping differences among the respondent groups in how they research and purchase insurance.

Recent Shoppers vs. Non-Shoppers:

  • Recent non-shoppers said they only pay some attention to their coverage and price at time of renewal and are more likely to research in-person, purchase through an agent and renew their policy automatically.
  • Shoppers, on the other hand, said they are more likely to review coverage and price very closely, research online, contact independent agents, purchase their policy online and renew their policy within 30 days of receiving notice.

These stark differences underscore why carriers need to pay attention to these behaviors and adapt their strategy to address these shopping and switching patterns to make sure they can retain their existing customer base.

Price Is King and Tops Loyalty

When it comes to insurance shopping, price was cited as the No. 1 reason consumers decided to switch insurance carriers, and the price difference doesn’t have to be as large as one might expect; a savings of $100 or less was enough incentive for 45% of all switchers across income levels. Even if a carrier offers a competitive price this year, it doesn’t mean the consumer 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. This data illustrates the impulse consumers have to shop to make sure that they’re getting the best deal. It’s only a matter of time before a consumer makes the jump to a carrier offering a better rate or easier application process.

Knowledge Is Power

If carriers don’t identify these behaviors and adapt their strategy to address these shopping and switching patterns, they will struggle to retain their customer base. We know price is the primary motivation for consumers to shop and switch, but carriers have an opportunity to use the data available to them about a consumer’s life events to engage and retain their valuable policyholders before they shop.

Life events that generally have the most influence on auto insurance shopping include: adding or removing a driver, buying or leasing a vehicle, decreasing household income, buying a house, getting married or divorced and moving. 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 monitor and anticipate when consumers are shopping.

See also: The Insurance Lead Ecosystem  

Carriers that implement data-driven solutions that monitor and anticipate key events can engage consumers at the right time and in the appropriate context to better accommodate their new or changing coverage needs. Without a robust, active risk management process, you may only know that a policyholder is shopping when it’s too late.

An insights-based approach helps create opportunities to deepen loyalty and retention, even in a price-based, commoditized market. Consumer insights can put you in the driver’s seat with both prioritizing your most valuable policyholders for retention outreach and creating revenue opportunities with existing and potential customers.

Download the Insurance Shopology Report here.

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About the Author

Ian Griffin serves as director, product management, insurance, for LexisNexis Risk Solutions. He joined the organization in 2014 and is responsible for the management of existing products and for developing new data solutions for the insurance industry.

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About the Author

Adam Pichon serves as vice president and general manager of the U.S. auto vertical for insurance at LexisNexis Risk Solutions.

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