The year is still young and wrapped in haze.
2021 looked and felt more like 2020 than many of us would have liked or even anticipated. Globally, we still face uncertainty from COVID-19 and its variants, causing continued disruption to businesses, schools, health systems, and life in general. Amidst this, 2021 seemed to be a year of striving to settle into a “new normal.”
In personal lines 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 posed unique challenges and opportunities for insurers and their distributors.
Now, insurers and distributors are trying to understand what will happen going forward.
The Pandemic’s Prolonged Impact
At Jornaya, a Verisk business, we specialize in transforming our proprietary comparison shopping data into actionable insights for major life purchase marketers to meet active shoppers in-market with timely and relevant outreach.
We have a front-row view of more than one billion online comparison shopping events every quarter. With such robust data, we can spot trends in consumer buying behavior in near real-time. 2021 showed continued increases in comparison shopping for auto and health insurance products, while shopping for property and life insurance adjusted from unprecedented highs in 2020.
Before we review these trends in detail, anecdotally, the data suggests multiple conclusions:
- Online shopping for insurance increased. There are more consumers navigating the online insurance market and with multiple shopping activities per consumer.
- Comparison shopping has become a larger part of the buying journey. Shoppers are using comparison shopping websites more than ever, suggesting a transition away from carrier sites being the only destination a consumer considers when they shop for insurance.
- This may be a permanent shift in consumer behavior. The changes that started in 2020 in how consumers shop for insurance may not have been a lightning strike; it appears to be more of a sustained shift that will remain for some time, and potentially for years to come.
How Did We Get Here?
To measure the pandemic’s impact on insurance, we need to look back to spring 2020 when Americans first began working from home — the moment insurance shopping noticeably began to shift.
Auto Insurance
In terms of initial pandemic online shopping, much can be attributed to macroeconomic factors. For example, people began driving less and insurance carriers starting aggressively advertising premium giveback programs. The intention of these givebacks was a proactive effort to retain customers; it may have had the opposite effect.
Suddenly, policyholders who otherwise may not have shopped their policies began paying attention to offers and exploring their options.
Consumers, already tightening budgets amid pandemic uncertainty, now had time on their hands and motivation to find savings. Consumers responded in droves, reviewing their policies and getting familiar with comparison shopping websites. This resulted in a 49% increase in auto insurance online shopping volume in 2020 compared to 2019.
In 2021, these levels did not drop off. Instead, and most notably, the elevated volume of shopping activity was sustained throughout the first three quarters of 2021 — proving this is more than a pandemic-related deviation. Auto Insurance saw a 16% increase in comparison shopping volume in 2021 over 2020.
Today, as drivers log miles closer to 2019 levels, the profitability surplus carriers maintained throughout the pandemic is being eaten away by increased claims frequency. Even new customer acquisition is becoming less profitable, as savvy policyholders are more likely to shop and leave prior to their first or second renewal cycle.
Home Insurance
In the spring of 2020, the US saw a housing market boom as well as historically low interest rates that sent many American homeowners rushing to refinance. Across the country, an exodus began with people exiting cities headed for the suburbs.
The combination of these new zip codes and changing driving behaviors resulted in something of a perfect storm exacerbating the online insurance shopping frenzy for auto, home, and bundled policies.
However, as median home prices skyrocketed in 2021, and available home inventory remained low, securing a new house became a challenge. Some buyers were priced out of the market or simply paused their home buying journey.
And so, after a 43% year-over-year increase from 2019 to 2020, home insurance shopping in 2021 landed almost 9% below the prior year’s volume.
Life Insurance
Life insurance shopping spiked early in 2020, with consumers constantly reminded of the need for financial security for their loved ones. However, the life insurance industry, which is predicated upon in-person medical exams and long sales cycles, was not ready for the demand.
During COVID’s peak months, consumers became impatient with this dynamic, and organic demand for life insurance fled almost as quickly as it came.
Insurers understood the immediate need to innovate and spent time retooling the purchase process and reconsidered how to offer products to a motivated, online buyer. According to the Insurance Information Institute, 29% of customers surveyed in 2020 preferred online life insurance sales, up 12%% from 2011.
Consumer interest in life insurance returned during the fourth quarter of 2020 and remained elevated through the first half of 2021.
The MIB Life Index reported US life insurance activity made its return to year-over-year growth in November 2021. Life insurance application activity grew 2.9% in November 2021 compared to 2020. And on a year-to-date basis, the industry remained in growth mode with November 2021 up 4.3% over November 2020, and 7.9% over 2019.
According to Jornaya data, life insurance comparison shopping remained relatively flat year-over-year, decreasing only slightly, with a 1.5% decrease from 2020. There was a 45% increase from 2019 to 2020.
Predictions
Although 2021 numbers were up, we’ve seen three straight months of decreased shopping volume (read: still well above 2019 levels) across auto, home, and life insurance. This may suggest that elevated shopping levels are tapering; it may also indicate that demand for new business leads is reducing while carriers address profitability challenges. With that in mind, here is what may lie ahead:
- Expect continued volatility among consumers shopping insurance policies. Ongoing changes in the housing market, as more families relocate or consider relocating, will impact household insurance needs. Impending rate hikes will inevitably drive some policyholders to shop, depending on the state.
- Increasingly, consumers will switch policies. The shift to internet-savvy shoppers was not the temporary spike as first thought during the pandemic. Shopping behavior has been permanently changed and carriers will need to rebuild brand loyalty with unique, world-class customer experiences. Until then, low prices will rule the day, and consumers will switch as often as required to maintain low premiums for their coverage needs.
- Supply chain issues will continue to impact auto and home insurance. The US auto and housing markets are feeling the effects of supply chain issues. It’s taking longer for homes to be built and for cars to arrive on dealer lots, so home and auto insurance purchases are being delayed. It’s likely this will persist in the home insurance market until 2023, as demand continues to outweigh supply.
The Way Forward
How can the insurance industry adapt to address the changes?
1. Deliver an exceptional digital experience.
As consumers have become more comfortable with shopping online for insurance, carriers must seek to deliver a differentiated experience online that they can be proud of. It requires the right data and technology to guide each prospective customer down a path tailored to their needs and on their terms.
Carriers are getting smarter about logging consumer shopping activities and preferences and generating marketing that’s not only well-timed, but relevant to what the consumer is shopping for… It’s what buyers expect. Carriers that offer great digital experiences will capitalize on the increased shopping expected this year.
2. Be thoughtful about targeting customers,
With increased shopping comes the opportunity for a land grab of market share from competitors. But with current profitability challenges, carriers should be thoughtful about the types of consumers they want to acquire as customers.
Even good underwriting risks may not be good business for a carrier if the policy cancels prematurely. Knowing who is shopping, and who is shopping most frequently, is vital to maintaining a profitable new business acquisition program.
3. Renew focus on strategic customer retention.
With mounting factors encouraging consumers to shop, along with the improved ease of shopping online, it is crucial for insurers to maintain connectivity to their best customers, especially those with shorter tenure.
In the short term, focus more on building out best-of-breed customer retention programs. The most advanced carriers will leverage data and technology to proactively assess churn risk and regularly connect with their best customers, even mid-term.
Looking Ahead
If 2020 was the year of change, and 2021 was the year of stabilization in the wake of change, this could be the year that affords prepared insurance providers incredible opportunity. It also poses substantial risk to those who are not ready. Staying informed of the changing consumer landscape can help insurers maintain resiliency and even identify opportunities for growth in a seemingly unending unprecedented market.