UBI shopping levels off late in 2022: J.D. Power

Auto insurance shopping increased in the fourth quarter of 2022 with a shopping rate of 12.1%, according to the latest quarterly shopping list report for U.S. auto insurance from J.D. Power and TransUnion. This is the highest shopping rate that J.D. Power has seen in the two years of tracking daily shopping. The rate of consumers switching between carriers was also up this past quarter – 4% responded that they switched their auto insurance carrier last year for lower rates, likely to cut down costs to ease the impacts of inflation and rising premiums.

Though many were looking for ways to cut costs, the report indicates that consumer telematics adoption, which includes programs often intended to provide discount offerings for drivers, was overall stagnant in 2022 after seeing some growth earlier in the year. The TransUnion Annual Outlook Survey, published October 2022, reported that, of those who received offers, 60% of consumers joined a telematics program – though many indicated satisfaction with the program discount, 40% responded that they saw their rates increase. The report suggests that this may contribute to a decline in telematics adoption.

"You can be paying by the mile and you could be having a lower rate by the mile every month where you drove safe, or drove better, depending on how those different programs talk about 'safe' and 'better,'" says Marty Ellingsworth, Executive Managing Director, Insurance Intelligence at J.D. Power. "These newer aspects of risk transfer, risk management, [and] safety improvement where the rewards are shared aren't in every state, but when they are, the word starts to spread.. but that only fits if it fits for you."

The report emphasizes that with many working a remote or hybrid job and demonstrating changes in their driving habits and patterns, the significance of offering usage based insurance (UBI) is growing.  As suggested in the report, insurers may want to consider UBI programs or strengthen their offerings.

"That characterization of being able to personalize the amount of insurance I need and the amount of risk I'm taking to my specific situation is vastly different than a one-size-fits-all, time-based contract," explains Ellingsworth. "For everyone where it's lower if someone can offer them that specific rate at a risk-based price parity, where would [customers] go next, price-wise? I think the customer locked in from the right pricing, with the right data, creates a strategic advantage in the marketplace…"

Some customer groups were more likely to shop for UBI this fourth quarter. Of those with only auto policies and no homeowners or renters insurance, referred to as "Sams" in the quarterly shopping list report, 5.7% were more likely to shop for UBI in the fourth quarter. Customers with both an auto policy and homeowners policy from different carriers, called "Wrights" in the report, were more likely to shop for UBI offerings with up to 4.8% this past quarter compared to the 2.8% seen in the third quarter.

"There's this personalization to a household level. What are your mobility needs?...What does the household need?... When you flip the script and talk about, as a consumer, what people really need, we're finding that price is important – but customer service, claims service and technology capabilities for people who want more digital, those types of intelligent matching of the things you value from an insurance company's risk advisory and risk transfer support and service is different for different household situations, " Ellingsworth states. "That new level of household risk advisory recommenders is, I think, the core insight I'm hoping the industry listens to because when you're shopping as a household, those are the needs, thoughts and motivators of how you evaluate the proposition."