According to TransUnion’s latest quarterly report, “Insurance Personal Lines and Perspectives,” industry-wide auto insurance loss costs are moderating, but consumers continue to seek out insurance products at higher premiums.
The US Consumer Credit Reporting Agency found that the number of people buying auto insurance in the second quarter of 2024 increased 6.5% year over year. The company said the trend is driven by rising premium prices in recent years, leading consumers to seek lower rates.
However, for the first time since December 2021, the monthly Consumer Price Index for auto insurance fell, dropping 0.2% between April 2024 and May 2024. “This slight change could indicate that insurers are approaching rate justification and that expected loss trends may be easing,” the company said in a press release.
In May, S&P Global Market Intelligence reported that auto insurers had an undesirable 2023 composite ratio of 104.9, but that result was about 7 percentage points better than the historically poor 2022. In July, Carrier Management reported that S&P GMI predicted a “dramatic recovery in underwriting profitability” for personal passenger auto insurance, with S&P GMI forecasting a personal auto composite ratio of 98.4 in 2024.
According to TransUnion’s second-quarter consumer survey, auto insurance purchases continued to increase in the second quarter of 2024, but switching behavior remained relatively flat, with only 40% of people who purchased auto insurance switching insurers.
In the real estate industry, the total number of homeowners buying insurance was higher in the second quarter than a year ago and on par with 2023, but overall activity was modestly flat, according to the TransUnion report.
Fewer traffic violations contribute to downward trend in insurance premiums
The company also said its research has found that states across the U.S. have begun to see a decline in traffic violations since the pandemic began, which insurers are using to price and underwrite risk.
“With fewer violations being issued, surcharge premiums are being collected by auto insurers, which is leading to a downward trend in premiums,” it said.
TransUnion estimates that the downward trend in traffic violations since 2020 has cost the auto insurance industry $200 million per year in lost premium revenue.
While state-to-state variations in automated reporting of traffic enforcement actions and inefficient sharing of violation information between states can be challenges, TransUnion reported that court records “provide a clearer picture of violation activity and report more than four times as many out-of-tax service (OOS) violations compared to state MVRs.” [motor vehicle records].”
Topics Automotive Profit Losses
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