Auto insurance purchases set a new record for the second consecutive quarter, with the number of U.S. consumers buying auto insurance up 7% compared to the same period last year, according to a new report.
This trend is driven by rising premiums, leading consumers to seek cheaper 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, according to a TransUnion report.
The change could signal that insurers are getting closer to rate justification and that expected loss trends may be moderating, according to TransUnion’s quarterly Personal Lines Trends and Outlook report.
One way insurers can improve profitability is by assessing driving history using court records and motor vehicle records. States across the U.S. have seen a decline in traffic violations since the pandemic began, according to the report, and insurers are using that to price and underwrite risk.
The decline in violations has led to fewer surcharges being collected by auto insurers, leading to a downward trend in premiums. TransUnion estimates that the decline in traffic violations since 2020 has cost the auto insurance industry $200 million in lost premium revenue annually.
More states are adopting automated traffic enforcement, and 17 of the 27 states that currently have automated traffic enforcement have banned their use in insurance pricing and underwriting. As a result, states with automated traffic enforcement saw a 25% decrease in violations between 2019 and 2023, compared with a 5% decrease in states without automated traffic enforcement, according to the report.
In 2019, 42% of accidents involved drivers who had committed a traffic violation within the past three years. In 2022, that figure jumped to 51%, and even though the total number of violations issued during this period decreased, the report argues that using past violations has increased its predictive power to forecast future auto insurance losses.
TransUnion said a decline in violations, the unavailability of automated traffic tickets and a lack of sharing of violation histories between states means insurers can’t accurately price risk.
The Trends & Outlook report research is based primarily on TransUnion’s extensive internal data and analysis and includes information on insurance shopping transactions from January 2023 to June 2024.
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