Customers are unbundling in favor of usage-based auto programs
J.D. Power’s Q3 2022 LIST report shows UBI programs are especially popular amongst those with ‘poor’ or ‘fair’ credit ratings.
More consumers are willing to unbundle their home and auto policies in order to take advantage of usage-based insurance (UBI) programs, according to the U.S. Auto Insurance Q3 2022 Shopping LIST Report from J.D. Power and TransUnion. Increasing auto premiums have driven customers to seek UBI programs as a way to save money by personalizing their premiums in light of inflated costs.
According to a report from Insurify, the average annual auto insurance premium climbed from $1,400 in 2019 to $1,648 in 2022 – an increase of about 17.7% – and customers are feeling the strain of these rising costs.
A recent survey from digital insurer wefox of consumers in the U.S., U.K., Poland, Italy, Switzerland and Germany showed seven-in-ten insurance customers are worried about keeping up with premiums. In addition, forty-percent of those who had recently dropped an insurance policy said they did so because it was no longer affordable.
The Q3 LIST report shows UBI programs are becoming increasingly popular, especially among those who self-report their credit rating as fair or poor. In August 2021, 18% of these customers reported using UBI programs, but that number grew to just over 22% in September 2022.
Insureds’ willingness to split their policies between companies is bad news for insurers, as bundled customers require overall lower acquisition costs and often demonstrate a higher degree of loyalty. A U.S. Home Insurance Study released by J.D. Power in September 2022 showed the retention rate for customers who bundle their policies is 95%, compared to 85% among those who only hold one policy with a company.