Auto insurance purchases continued to increase, but rates stabilized in Q2

Auto insurance shopping volume set a new record for the second consecutive quarter, according to a new report showing that the number of American consumers buying auto insurance increased 7 percent from the same period a year ago.

This trend is driven by rising insurance premiums, which have motivated consumers to purchase lower rates. However, for the first time since December 2021, the monthly consumer price index for auto insurance fell — a 0.2 percent decrease that occurred between April 2024 and May 2024, according to the TransUnion report.

The change could signal that insurers are moving closer to rate adequacy and that potential loss trends could moderate, according to TransUnion’s quarterly Personal Insurance Lines Trends and Outlook report.

One means for carriers to improve profitability is by using court and motor vehicle records to evaluate driving history. Since the pandemic, US states have started issuing fewer traffic violations, which insurers have used to set prices and underwrite risks, according to the report.

Due to fewer violations issued, auto insurers captured fewer dollars in excess premiums, contributing to negative premium trends. TransUnion estimates that the declining volume of traffic violations since 2020 has cost the auto insurance industry about $200 million a year in lost premiums.

Several states have also adopted automatic traffic enforcement – ​​17 of the 27 states that currently use automatic traffic enforcement prohibit the use of these violations in insurance assessment and underwriting. As a result, from 2019 to 2023, states with automatic enforcement saw a 25 percent drop in violations, compared to a 5 percent drop in states without, according to the report.

In 2019, 42% of accidents involved drivers who had had traffic violations in the previous three years. In 2022, that number rose to 51 percent, so the predictive power of using past violations to project future auto insurance losses increased over this period, despite fewer total violations issued, the report said.

Fewer violations, unusable automatic traffic citations and a lack of historical violation sharing between states prevent insurers from accurately pricing risk, according to TransUnion.

The Trends and Outlook Report research is largely based on TransUnion’s extensive internal data and analysis and includes information on insurance purchase transactions from January 2023 to June 2024.