what you need to know
- Customers appear to be making more comparison purchases.
- They can be harder to hold.
- Insurers have to think carefully about which customers they want to keep.
The year is still young and shrouded in mist.
2021 looked and felt more like 2020 than many of us wished or even expected. Globally, we still face uncertainty from COVID-19 and its variants, causing ongoing disruption to businesses, schools, healthcare systems, and life in general. In the midst of this, 2021 appeared to be a year of striving to settle into a “new normal”.
In personal insurance in the United States, we saw a similar stabilization effort in 2021, with insurance providers finding their way amid a more active and sustained online shopping market. This presented insurers and their distributors with unique challenges and opportunities.
Now insurers and traders are trying to understand what will happen in the future.
The ongoing effects of the pandemic
At Jornaya, a Verisk company, we specialize in converting our proprietary price comparison data into actionable insights for major life insurance marketers to meet active buyers in the market with timely and relevant outreach.
We have a direct view of more than a billion online comparison shopping events every quarter. With such robust data, we can identify trends in consumer buying behavior in near real time. 2021 saw a continued increase in comparison shopping for auto and health insurance products, while property and life insurance shopping adjusted from unprecedented highs in 2020.
Before examining these trends in detail, the data anecdotally suggest several conclusions:
- Online shopping for insurance has increased. There are more consumers navigating the online insurance market and conducting multiple shopping activities per consumer.
- Comparison shopping has become a bigger part of the buying journey. Buyers are using price comparison websites more than ever, suggesting that provider websites are the only destination a consumer considers when purchasing insurance.
- This can be a permanent change in consumer behavior. The changes in how consumers buy insurance that began in 2020 may not have been a lightning bolt; it seems more like an ongoing shift that will last for some time and possibly for years to come.
how did we get here
To gauge the impact of the pandemic on insurance, we need to look back to the spring of 2020, when Americans first started working from home –– the moment insurance buying began to noticeably shift.
Regarding the initial pandemic online shopping, much can be attributed to macroeconomic factors. For example, people began drive less and insurance carriers aggressively launching advertising premium reimbursement programs. The intent of these givebacks was a proactive attempt to retain customers; it might have had the opposite effect.
Suddenly, policyholders who might not otherwise have bought their policies began paying attention to offers and exploring their options.
Consumers, already cutting budgets in the face of the uncertainty of the pandemic, now had time and motivation to find savings. Consumers responded in droves, reviewing their policies and familiarizing themselves with price comparison sites. This resulted in a 49% increase in online auto insurance purchase volume in 2020 compared to 2019.
In 2021, these values have not fallen. Instead, increased purchasing volumes in particular persisted through the first three quarters of 2021 — proving that this is more than a pandemic-related deviation. Auto insurance saw a 16% increase in comparison purchase volume in 2021 versus 2020.
Today, as drivers are miles closer to 2019 levels, the profitability surplus sustained by transport companies during the pandemic is being eroded by increased claims incidence. Even new customer acquisition becomes less profitable as savvy policyholders are more likely to buy and leave before their first or second renewal cycle.
In the spring of 2020, the US experienced a housing market boom and historically low interest rates, prompting many American homeowners to rush to refinance. An exodus began across the country, with people leaving the cities and moving to the suburbs.
The combination of these new zip codes and changing driving patterns resulted in a kind of perfect storm that fueled the online insurance buying frenzy for auto, home and bundled policies.
However, as median home prices skyrocketed in 2021 and available home inventory remained low, securing a new home became a challenge. Some buyers have been priced out of the market or simply put their home buying journey on hold.
After a 43% year-on-year increase from 2019 to 2020, home insurance purchases in 2021 ended up nearly 9% down in volume from the prior year.