Auto Insurance Shopping Continued to Rise Even as Rates Stabilized in Q2 2024

TransUnion report finds court record data essential to helping insurers capture driving violation histories that enable improved risk segmentation and pricing accuracy

CHICAGO, Aug. 13, 2024 (GLOBE NEWSWIRE) — Auto insurance shopping volume set a new record for the second consecutive quarter, according to new research from TransUnion (NYSE: TRU). The number of U.S. consumers shopping for auto insurance was up 7%, compared to Q2 2023 (YoY).

This trend has been driven in recent years by increasing insurance premiums that motivated consumers to shop for lower rates. However, for the first time since December 2021, the month-to-month Consumer Price Index for Motor Vehicle Insurance decreased—a 0.2% drop that occurred between April 2024 and May 2024.

The slight shift could signal that insurers are approaching rate adequacy and prospective loss trends could be moderating. These insights and more are part of TransUnion’s latest quarterly Insurance Personal Lines Trends and Perspectives Report.

“It is very encouraging to see indicators that carriers are returning to rate adequacy, and ultimately profitability,” said Stothard Deal, vice president of strategic planning for TransUnion’s insurance business. “TransUnion’s research has uncovered ways for insurers to accelerate the move to profitability and prepare to resume marketing activity in a more-efficient manner.”

Driving record and violation insights
One means for carriers to shorten the path to profitability is by leveraging court records in addition to state Motor Vehicle Records (MVR) to assess driving history. Beginning with the pandemic, states across the U.S. began issuing fewer traffic violations, which insurers have used to price and underwrite risks.

Due to a lower number of violations issued, auto insurers have been capturing fewer dollars in surcharge premiums, thereby contributing to negative premium trends. TransUnion estimates the declining volume of traffic violations starting in 2020 has cost the auto insurance industry an estimated $200 million per year in lost premium capture.

In addition, more states have adopted automated traffic enforcement, though reporting varies significantly. For example, 17 of the 27 states that currently use automated traffic enforcement prohibit the use of these violations in insurance rating and underwriting. As a result, from 2019 to 2023, states with automated enforcement saw a 25% decrease in violations compared to a 5% decrease in states without.

The issue is further complicated by inefficient sharing of violation information between states. While 48 states have inter-state violation sharing programs, only 24 execute them effectively. This often means drivers with dangerous prior violations can relocate to a new state, potentially leaving their histories behind.

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Violations increasingly predict loss
In 2019, 42% of accidents involved drivers who had traffic violations within the prior three years. In 2022, that number jumped to 51%— meaning the predictive power of using prior violation history to project future auto insurance losses has increased during this period despite a lower number of total violations issued.

The confluence of these factors—fewer violations, unusable automated traffic citations, and a lack of inter-state violation history sharing—means that insurers are significantly hindered from accurately pricing risk. Compounding this issue is that most insurers rely on MVRs to access driving histories.

While MVRs are subject to some of these same limitations, TransUnion has found court records offer a clearer view of violation activity, returning over four times the number of ratable out-of-service (OOS) violations compared to state MVRs. Additionally, court record data is more cost effective than carrier processes that depend solely on MVR data.

Click here to read the latest Insurance Personal Lines Trends and Perspectives Report.

About TransUnion’s Insurance Personal Lines Trends and Perspectives Report
This quarterly publication examines trends in the personal lines insurance industry, including shopping, migration, violation, credit-based insurance stability and more. The Trends and Perspectives Report research is based almost entirely on TransUnion’s extensive internal data and analyses. It includes information on insurance shopping transactions from January 2023 to June 2024. However, the report excludes shopping data from insurance customers in California, Hawaii (auto), Massachusetts (auto), and Maryland (property), where credit-based insurance scoring information is not used for insurance rating or underwriting.

About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good^® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world. http://www.transunion.com/business