The drive to find more affordable coverage was amplified during 2020 as many consumers looked to trim expenses. This has stabilized in 2021 with a return to pre-pandemic trends in shopping and claims.
Following a year of profitability in the auto insurance market, reports show the market stabilizing, suggesting that 2020's performance is unsustainable.
The personal auto insurance market's surge last year, driven by a shopping frenzy and a drop in claims, seems to have reached its end and a return to a pre-coronavirus pandemic level of profitability can be expected, according to multiple industry trackers, such as J.D. Power and Fitch Ratings.
The shopping frenzy was driven by old consumer habits which were amplified during the pandemic. Pre-pandemic, 77% of consumers actively shopped for new carriers, according to a 2020 study from J.D. Power. During the early part of the pandemic, this activity was up by as much as 20%.
The drive to find better and more affordable coverage was amplified during 2020 as many consumers braced for financial uncertainty by looking to trim expenses. The increase in shopping, combined with a decrease in drivers on the road and a subsequent decrease in claims, led to a standout year for the personal auto sector.
However, this activity has stabilized in 2021 with a return to pre-pandemic trends in shopping and claims, according to Fitch Ratings analysts.
“Personal auto insurers saw sharp increases in underwriting profits for 2020 that were supportive of credit, amid a reduction in driving that led to substantially fewer insurance claims for the year," Fitch Ratings said. “However, competitive pricing forces and a return to historical claims frequency patterns as the economy recovers make this level of performance unsustainable."
These trends signal how the insurance industry as a whole will fare the rest of the year.
As the market returns to its “old normal," analysts say that stabilizing national patterns will lead to an uptick in competition at the state level. J.D. Power data suggest that the South and Southwest are key regions of the U.S. poised for change.
Among the key “battleground" states in these regions is Texas, where market leadership is separated by less than two points between four carriers. Allstate is currently taking the lead and has captured 28% of the quote volume in that time period, according to J.D. Powers. The carrier has been performing particularly well in several metro areas such as Dallas. Establishing itself in the state would be a major pick-up for the carrier and demonstrates the market size and growing population trends of the region.
Jan Alex is an IA contributing writer.