The pandemic caused a 55% decrease in miles driven, encouraging auto insurance customers to shop around for more personalized and cheaper policies, per the J.D. Power 2021 U.S. Insurance Shopping Study. The 15th annual iteration of the study surveyed 12,971 US insurance customers who requested an auto insurance price quote from at least one competitive insurer in the previous nine months. The study was fielded from March 2020 through January 2021.
Auto insurance customers shopped around more than ever before, but incumbents got the biggest tailwind. There has been a 6-percentage-point increase in shopping activity among those customers who were affected by the pandemic financially. Although insurtechs like Metromile, Root, and Clearcover have grown quickly thanks to their data-driven policy prices, incumbents succeeded in taking an even bigger share of the market. In the past year alone, there was a 3% year-over-year increase in auto insurance customer migration to the five biggest insurers, likely because incumbents met customers’ pandemic woes on a similar footing as insurtechs. For example, Liberty Mutual offered blanket premium refunds and reductions to customers who drove less due to the pandemic, just as insurtechs like Metromile advertised their pay-per-mile offerings for users to pay less. Meanwhile, State Farm’s usage-based insurance offering, Drive Safe & Save, lets customers earn discounts up to 50%. For context, Metromile customers save 47%, on average, using its telematics capabilities.
The findings underline that insurtechs need to do more to offer customers services that truly stand out from incumbents’. Here are two ways insurtechs can better differentiate from incumbents and attract more customers.