Drivers Are Stressed About Car Insurance Affordability as Rate Increase Show No Signs of Slowing  May 17th 2023

40% of Insured Drivers in the U.S. Are Stressed About Affording Their Car Insurance

With the annual inflation rate still at 5%, Americans are paying higher prices for everything — and essential financial services are no exception. In fact, an exclusive new survey reports 43% of insured drivers in the U.S. are paying more for their car insurance than they were last year at this time.

Perhaps unsurprisingly, 40% of insured drivers say they're stressed about being able to afford car insurance, a requirement for drivers in most states, adding to the broader anxiety Americans feel around the pressures on their wallets. This is especially true with many millennials and Gen Z — more than half (55%) of drivers age 18 to 34 are stressed about being able to afford auto insurance and 24% say that they're "very stressed."

Other findings from the Policygenius Car Insurance Affordability Survey include:

45% of insured drivers ages 18 to 34 say they've thought about driving without car insurance because of the cost in the past year, and 17% have actually done it. Younger drivers (18 to 34) were the most likely to have switched or considered switching car insurance companies because of high costs 36% said they had thought about changing car insurance companies because of high rates in the past year but haven't switched yet 25% said they switched companies in the last 12 months because their car insurance was too expensive

Progressive plans ‘aggressive’ rate increases, reports 10% loss severity increase

In its Q1 2023 report to shareholders, Progressive said it won’t slow down on personal auto insurance rate increases any time soon following a 4% companywide increase during the quarter.

“Considering our first quarter profitability results, and the fact that inflation has not abated, we are re-evaluating our rate plans and intend to be aggressive with raising rates over the remainder of the year,” wrote President and CEO Tricia Griffith. “Of course, some of these rate increases will be subject to regulatory approval and any change in circumstances could lead us to determine if more or less rate is needed in order to achieve our calendar year CR [combined ratio] goal.”

Rates increased totaled more than 13% during 2022. Griffith said in this year’s Q1 letter to shareholders that, “While not where we’d like to have started the year, there were a lot of factors that contributed to our underwriting results.”

The results were a 10% increase in loss severity compared to Q1 2022, similar to the year-over-year increase experienced in Q4 2022, while frequency was relatively flat, Griffith said. Loss costs were higher than Progressive anticipated

How to cross-sell and retain insurance customers

Super-bundlers, those households that purchase multiple policies with one provider, are the most coveted group of customers in insurance.

These high-value insurance customers are considered stickier. They buy more coverage and tend to have higher customer satisfaction scores. Customers who bundle their auto and homeowner or renter policies have retention rates of 95%, according to a J.D. Power. Among non-bundlers. retention rates drop to 85% for homeowners, and 82% for renters. Bundlers are also the largest customer segment in the U.S. market where they account for $198 billion or 52% of total personal lines insurance premiums annually, according to Progressive in the second quarter of 2022.

However, retaining bundlers is going to be challenging. Auto insurance rates have increased by a jaw-dropping 14% between 2022 and 2023 bringing the national average annual premium for full coverage from $1,771 to $2,014, according to Bankrate. In some states like Florida and New York, average annual premiums exceed $3,000 per year. The J.D. Power study found home and auto bundlers are leading overall declines in satisfaction scores. Auto bundlers reported a 10-point decline in price satisfaction, compared to non-bundlers' 1-point decline, according to the study.

Mitchell Report Highlights Increase in Electric Vehicle Collision Claims

Both the US and Canada see Q1 2023 rise in repairable claims frequency

Mitchell, an Enlyte company and leading technology and information provider for the Property & Casualty (P&C) claims and Collision Repair industries, today reported that electric vehicle (EV) repairable claims frequency increased in Q1 2023 to 1.13% in the US and 2.41% in Canada. The data was featured in the company’s latest Plugged-In: EV Collision Insights publication, which provides up-to-date EV claims and market information to the auto insurance and repair industries.

Highlights: - Average repairable severity has decreased to $4,749 in the US and $6,406 in Canada but remains higher than for internal combustion engine (ICE) vehicles
- OEM parts usage and the percentage of parts repaired increased to 90.76% and 12.68% respectively - Refinish time is nearly an hour more than for ICE automobiles, adding to claim costs - Models new to the market are now entering U.S. collision repair facilities for the first time

“EV sales broke records in 2022 and the combination of high gas prices, government incentives and increased vehicle production helped drive consumer demand,” said Ryan Mandell, director of claims performance at Mitchell. “With more EVs on the road, there will naturally be more EV collision claims. That puts a strain on auto insurers, who must balance policyholder expectations with higher than average vehicle repair costs and cycle time. It also puts a strain on collision repairers tasked with properly and safely restoring these automobiles to OEM standards.”

Insurtech Root's private auto combined ratio tops 200% for 2nd straight year

Although it raised rates and slashed expenses in 2022, insurance technology company Root Inc. recorded a combined ratio well in excess of 200% in its private auto segment for the second straight year.

Root had a private auto combined ratio of 277.0% in 2022, up from 256.8% in 2021 and 186.8% in 2020. Branch Insurance Exchange recorded a combined ratio of 218.5% in its private auto business, a substantial drop from the 581.8% it recorded in 2021, according to an S&P Global Market Intelligence analysis.

Among the five insurers in this analysis, Clearcover Insurance Co. had the third-highest private combined ratio for 2022 at 157.8%, followed by Just Insure Inc. at 119.7%. Metromile Inc., which was purchased in July 2022 by Lemonade Inc., was fifth at 119.4%.

The analysis was based on the Insurance Expense Exhibit of the annual statutory property and casualty statements from US filers with the National Association of Insurance Commissioners.

The ratios are a reflection of the increases in frequency and severity that have plagued auto insurers across the US for the past two years. All five companies in the analysis had private auto combined ratios that exceeded the 111.8% mark that the property and casualty insurance industry as a whole recorded for 2022.