Shifts in Insurance Consumer Behavior Reflect Broader Economic Influences
A recent report from J.D. Power reveals significant changes in consumer shopping and switching behaviors across various sectors of the insurance industry, reflecting broader economic influences.
Auto Insurance Changes
The Q1 2025 J.D. Power Insurance Intelligence report shows that the auto insurance shopping rate rose to 14.1% in Q1, a slight increase from the previous quarter and a significant 1.3 percentage point increase from the same period last year. Despite this heightened shopping activity, the switching rate remained largely unchanged at 4.1%, representing a small decline from the previous quarter but an improvement over the same period last year. This suggests that while consumers are actively exploring their options, fewer are making the decision to switch providers.
The auto insurance market is expected to shift toward more traditional underwriting practices, with insurers focusing on increasing policy growth while raising premiums for higher-risk policyholders. Insurers will need to contend with rising claims costs due to increased vehicle prices and repair costs, a challenge exacerbated by ongoing supply chain issues.
Home Insurance Changes
For home insurance, the shopping rate was 6.6%, reflecting a modest 0.1 percentage point increase from Q4 but a slight decrease compared to the previous year. The switching rate for home insurance was 2.5%, a 0.2 percentage point decrease from the prior quarter, although it was slightly higher year-over-year. Insurers in this space are likely to focus on maintaining profitability as rising costs of home repairs and construction materials pose a challenge.
Rate increases and tighter underwriting strategies are expected as insurers adjust to the higher costs of rebuilding and repairs driven by inflation. Meanwhile, renters’ insurance saw a shopping rate of 6.2%, down 0.2 percentage points from the previous quarter but up 0.5 percentage points from a year earlier. The switching rate was 3.8%, a notable 0.9 percentage point drop from Q4 2024, though still slightly higher than in the same period last year.
Economic Factors Influencing Insurance Market
The report indicates that broader economic factors, such as tariffs and inflation, are expected to continue influencing consumer behavior in the insurance market. The rising cost of goods and services, including building materials, is anticipated to put pressure on both auto and property insurance premiums. The ongoing uncertainty around tariffs, particularly on items like steel, aluminum, and other construction materials, could further elevate costs.
As a result, insurers may adjust their focus toward maintaining profitability, with a particular emphasis on rate increases and refined underwriting practices to offset higher claims costs. The full effects of economic uncertainty on shopping and switching behavior are expected to become clearer as the year progresses. Insurers will need to remain adaptable, adjusting their pricing models and retention strategies to manage the impact of rising costs and shifting consumer preferences.
