More consumers are shopping for auto insurance than ever before. That gives independent insurance agents a cause for concern. It also gives them opportunities.
A report from LexisNexis showed that consumers shopped for auto insurance in record numbers in 2024. In the fourth quarter, the year over year growth rate in shopping was 26%, and that rate was down from 31% in the third quarter. New policy count grew 17.7% in the fourth quarter, again down from 25.9% in the third quarter. More than 45% of in-force policies were shopped at least once during the year.
The report also found that shopping led to switching carriers. In the first six months, the growth carrier switching outpaced the growth in shopping. That trend reversed in the second half.
It should be no surprise that premium increases drove the increased shopping activity. Switching growth slowed during the second half of the year because many carriers had increased their rates. This made it harder for consumers to find significant savings than it was in the first six months. With the pace of rate increases settling down, the report forecasted that ubiquitous advertising by auto insurance carriers will be the primary inspiration for people to shop in 2025.
The biggest advantage consumers gain from buying insurance through independent agents is that agents can do the shopping for them. That, however, does not guarantee that a shopper will stay with the current agent. Some direct writers make it easy for customers to obtain quotes and policies online or over the phone. Some agencies, particularly smaller ones, may have fewer available markets than do their larger peers. This could lead to customers jumping to larger agencies that offer more choice.
Increased shopping by price-conscious consumers should concern agents. However, it also presents an opportunity for agents who can demonstrate their value over direct writers and their more passive competitors.
These are some of the ways agents can turn the situation to their advantage:
First, be proactive about retaining existing customers. Start looking at renewals at least 45 days in advance. Let your customers know, with frequent clear communication, what market conditions are like and what they can expect.
Further, tell them what steps your agency is taking to help. Offer alternative markets within the agency. Suggest that they increase their deductibles to the extent they can afford to. Some states mandate premium discounts for drivers who take accident prevention courses; if your customers are in one of those states, encourage them to take the course. If they have college-age children and some carriers offer discounts if the student is attending a school more than 50 miles away, contact those customers to find out if they qualify. Look for other circumstances that customers might not have told you about and that might save them money.
The best thing an agency can do to prevent shopping or make it hard for a client to shop is to account round. There are several advantages to this. First, it gives them a multi-policy discount that makes their rate very competitive. Secondly, shopping for more lines of insurance can complicate the shopping process, especially with the hard market for homeowners’ insurance. Shopping three lines, such as homeowners, auto, and a boat or umbrella policy, is more challenging than shopping only one. Lastly, those who have the entire account with one agency tend to have a stronger bond with that agency.
Realize that not every customer can find a better deal. If they’ve had frequent loss activity or a history of traffic violations, you may not be able to help them reduce their premiums. It is important that you communicate that clearly to them. However, your competitors might not be able to do any better.
This is also the time for aggressive marketing to pick up new customers. Some may be with complacent agencies that are content to pass along bad news without doing much to help. Their passivity is your opportunity. If the agency has enough staff to service more customers, advertise in channels (including social media) where you are likely to get their attention. This is the time to tell the stories about how you have helped other people.
Finally, keep in mind that this extra work comes with a payoff. Auto insurance premiums are increasing, and that means commission revenue is also increasing. Customer shopping can increase your agency’s bottom line.
Consumers are not content to merely accept higher premiums and poor service. With the right attitude and approach, your agency can benefit from their willingness to shop.
