auto insurance and covid-19 consumer outlook and trends ins… · 25/06/2020 · when comparing...

AUTO INSURANCE and COVID-19

Consumer outlook and trendsConsumer behavior stable, but risks present

© 2020 J.D. Power. All Rights Reserved.

Kyle Schmitt

Vice President and Global Managing Director

Insurance Intelligence and Solutions

Data contributing partners:

June 25, 2020


Consumer outlook is growing amidst re-opening, but risks remain in August and SeptemberJune 25, 2020

2

Our key themes from May remain, but continue to evolve as economic conditions appear poised to dominate the next 12 – 18 months:

▪ Did premium relief create loyalty or prevent disloyalty? Overall satisfaction remains almost 20% below pre-COVID levels

− Consumer satisfaction is a key retention indicator—consumers are about 20% less satisfied on average today than before COVID

− Consumers AWARE of premium relief (56%) remain 12% below pre-COVID satisfaction indicating that loyalty was preserved more than created

− Consumers UNAWARE of premium relief (44%) are 25% below pre-COVID satisfaction indicating they may be less loyal today

− The auto insurance industry has a satisfaction deficit vs. pre-COVID; additional shocks could see rapid behavioral change

▪ Three behavioral groups remain, but the future retention outlook may come back into question during Q3 and into Q4

− Employment NOT impacted: largely exhibit pre-COVID satisfaction, rate sensitivity and service expectations today

− Employment impacted: lower satisfaction, high rate sensitivity, elevated propensity to shop / switch and likely to act swiftly if financial situation changes

− Forward-looking drivers: less tied to employment, but clear outlook for reduced mobility—looking for their carrier to anticipate their ‘new’ situation

▪ As consumers settle into a reduced mobility outlook, telematics interest remains high

− Consumers outlook for reduced miles driven continues (59%), and they remain highly interested in telematics solutions (46%)

− BUT, they appear to be on the move again at close to pre-COVID levels… will perceived needs catch up to actual behaviors?

▪ Incomes will likely be going DOWN in Q3 and into Q4, perhaps rapidly—how well do you know your customers?

− When CARES Act stimulus enhanced benefits (07/31), federal eviction freezes (07/25), Fannie / Freddie foreclosure moratoriums (08/31) and federal

student loan forbearance (09/30) expire, individual impacts may materialize quickly and result in surges of shopping / switching / cancelling activityKE

Y R

ISK

MARKET CONTEXT


Consumer economic sentiment rising from lowsConsumers exhibit a cautious near-term outlook, but there are signs that optimism is growing as more believe the worst is now or behind us. In general, consumers see a c. 18 month horizon for macro conditions to look like a recovery

June 25, 2020

4

51% of consumers feel that it will take 1 year or more

to recover jobs lost due to COVID-19

3%

8%

18%

26%

23%

12%

2%

8%

2%

5%

11%

20%

30%

16%

5%

11%

2%

7%

14%

20%

26%

16%

6%

9%

Less than 1 month

1 to 2 months

3 to 5 months

6 to 12 months

1 to 2 years

3 to 5 years

6 or more years

I don’t know

Apr 3-5 May 15-17 May 29-31

Individual consumer economic sentiment shows signs of

caution, but with growing optimism emerging

17%

22%

37%

24%

15%

19%

42%

24%

17%

20%

37%

25%

22%

21%

34%

23%

The worst is

behind us

The worst is right

now

The worst is yet to

come

Don't know

May 1-3 May 8-10 May 15-17 May 29-31

c.

19

mo

nth

s w

eig

hte

d a

ve

rag

e


Economic activity is beginning to increaseAs states re-open and many businesses return, economic activity is showing signs of return—while the rebound has not been immediate, consumers have money due to CARES Act and other programs enabling them to spend

June 25, 2020

5

States are re-opening at varying speeds, but consumer mobility

and economic activity continue to increase

Source: Washington Post (updated 24 June, 2020)

1.41

-11.48

-7.69

(12)

(10)

(8)

(6)

(4)

(2)

0

2

Weekly Economic Index (WEI)The WEI is an index of ten daily and weekly indicators of real economic

activity, scaled to align with the four-quarter GDP growth rate

Source: Federal Reserve Bank of New York as of June 25, 2020

Increase in the WEI for the week of June 20 was

driven by increases in fuel sales, tax withholdings,

and railroad traffic, and a small decrease in initial

unemployment insurance (UI) claims, which more

than offset a decline in electricity output


Consumers back on the move, but in a new wayConsumer mobility is back to near pre-COVID levels. Given few office openings, this movement is clearly different as contact with others remain significantly reduced

June 25, 2020

6

Mobility is returning, but contact with fellow consumers remains

down significantly YoY

Source: Cubeiq Source: Cubeiq

Consumers staying at home continues to decrease, but appears

to be stabilizing at slightly elevated levels


Household fiscal cliff risks in Q3 / 4 should be monitoredThe CARES Act provided substantial economic benefits to help families and individuals cope with widespread, sudden job loss. Those additional funds have kept the consumer afloat, however, a reversal in August could rapidly change behaviors

June 25, 2020

7

Unemployment remains at

elevated levels

Source: U.S. Bureau of Economic Analysis, St. Louis Federal Reserve

Incomes have risen since April due to

stimulus

Stimulus has been significant for lower

income bands

3.6 3.5 4.4

14.7

13.3

6.9 7.0

8.7

22.8

21.2

2020-01-01 2020-02-01 2020-03-01 2020-04-01 2020-05-01

U3 Rate U6 Rate

Source: Dept. of Labor, St. Louis Federal Reserve

Source: National Bureau of Economic Research, Working Paper 27216 (May 22020)

Notes: 1) This figure shows the fraction of earnings that are replaced by unemployment benefits

for workers at deciles of the weekly earnings distribution. The horizontal line shows a replacement

rate of 100%, which is where benefits are equal to earnings.


Miles driven returning, but seasonally downConsumers are back on the move as miles driven returns to pre-COVID levels, however, as we move into the heavier summer driving season miles driven remains down 4 – 9%

June 25, 2020

8

Source: Cambridge Mobile Telematics, U.S. Federal Highway Administration

In partnership with:

US miles driven per day is basically back to pre-COVID levels as mobility returns during re-opening

June / July driving levels tend to be 4 – 9% higher than march indicating that ‘typical’ driving has not yet returned

150,000

200,000

250,000

300,000

Jan '17 Apr '17 Jul '17 Oct '17 Jan '18 Apr '18 Jul '18 Oct '18 Jan '19 Apr '19 Jul '19 Oct '19 Jan '20 Apr '20

Vehicle Miles Travelled (millions of miles, not seasonally adjusted)

March 2019

July 2019

+ 8.9%


Watching for potentially sudden risk shiftsSpeeding remains up as miles driven increases, but hard braking is down indicating congestion remains light compared to pre-COVID; however, impact severity is increasing potentially putting pressure on profitability

June 25, 2020

9

Source: Cambridge Mobile Telematics

In partnership with:

Hard braking continues a downward trend indicating that roads are less congested than is typical

Speeding continues to be c. 20% higher than pre-COVID driving and continues to remain elevated despite mobility increases

AUTO INSURANCEImpact of COVID-19 on the auto insurance consumer


Consumer satisfaction deficit remainsCarriers still have an almost 20% consumer satisfaction deficit compared to March. Satisfaction is a key driver of retention with very satisfied customers also acting as brand advocates

June 25, 2020

11

How satisfied are you with your current auto insurance company?

Very dissatisfied

12%

8% 7%7%

13%

12%13% 13%

25%

22% 25%24%

31%

30% 28% 29%

52%

64% 62% 60%

44%51% 51% 51%

14-Apr 28-Apr 12-May 23-Jun 14-Apr 28-Apr 12-May 23-Jun

AWARE population UNAWARE population

Somewhat dissatisfied

Neither satisfied nor dissatisfied

Somewhat satisfied

VERY SATISFIED(Advocates)

56% 44%

9%9% 9%

13%

10%10% 10%

16%

18%

32%

29%

27% 26% 26%

68%62%

51%47%

57% 56% 56%

24-Mar 31-Mar 7-Apr 14-Apr 28-Apr 12-May 23-Jun

37% 63%

TOTAL population

After stimulus and premium relief announcements


0%

5%

10%

15%

20%

25%

24-Mar 31-Mar 7-Apr 14-Apr 21-Apr 28-Apr 5-May 12-May 19-May 26-May 2-Jun 9-Jun 16-Jun 23-Jun

Shop for another carrier Switch to a new carrier Increase my deductible Reduce my coverage (e.g., collision, comprehensive) Cancel my policy

Shopping behaviors remain stable since late AprilAs the extraordinary changes being experienced during late March and April have subsided, consumers intent does not seem to indicate broader behavior changes at the moment—shopping remains slightly elevated, but no current shocks

June 25, 2020

12

What, if any, methods do you plan to use to manage the cost of your auto insurance?

Premium relief

announcements

CARES Act

passed

First CARES Act

deposits

Source: Bureau of Economic Analysis (BEA) , May 29, 2020

IF employment is impacted:

Consumers that received CARES Act stimulus

indicate an c. 50% increased risk of taking

additional action once stimulus expires


Consumer sentiment and behaviors closely alignedWhen comparing consumer sentiment to actual behavior, we see similar trends—YoY shopping remains elevated, especially compared to March levels. TransUnion has indicated that these May trends remain relatively stable through June

June 25, 2020

13

Source: TransUnionNotes: 1) Percentage of total shopping population: TrueRisk Auto Score 300 – 400 (15%) and 801+ (10%)

Actual consumer shopping behavior closely followed

sentiment by just a few days / weeks…

Higher credit tiers shopped at elevated levels since

premium relief announcements and stimulus

2019-2020 YoY shopping change (overall) 2019-2020 YoY shopping change by TrueRisk Auto Score (1)

CLICK HERE for access to TransUnion June Snapshot Report

https://www.transunion.com/industry/insurance/shopping-studies


40%39%34%31%

45%42%41%

57%

6/235/124/284/14

NO YES

Consumer finances dominate premium confidenceWhile premium relief was generally well received and the timing was right, employment status is driving confidence indicators in continuing ability make premium payments

June 25, 2020

14

Are premium actions enough to help ease financial

pressure (of those AWARE)?

Of those AWARE, employment status is a key indicator of

whether premium relief eased financial pressure enough

Confidence in making payments largely driven by

employment and compensation status

5%

0%

8%

5%

14%

16%

8%

7%

19%

26%

29%

24%

24%

25%

21%

17%

27%

21%

28%

16%

29%

27%

69%

73%

49%

53%

35%

55%

34%

32%

12-May

23-Jun

12-May

23-Jun

12-May

23-Jun

12-May

23-Jun

Very Concerned Somewhat Concerned Somewhat Confident Very Confident

No change in

employment

Salary has

been reduced

Hours have

been reduced

Laid-off /

Furloughed

70%

4%

7%

14%

47%

33%

20%

35%47%

18%29%

58%

14%16%

53%

32%

Yes, it's enough No, not enough Don't know

No change in employment Laid off/Furloughed Hours/salary reduced Prefer not to answer


Getting out the message is critical to retentionContact from carrier continues to lag awareness indicating that many consumers are being communicated with via mass market channels despite active and personal communications driving better results

June 25, 2020

15

▪ Still more than 50% of consumers have not heard, or noticed attempted

communication, from their carrier since the onset of COVID-19

▪ Consumers that have received contact are almost 2x less likely to shop and

switch compared to those who have not received communication

▪ While a difficult task, personal outreach to understand individual situations and

to help find personal solutions is a highly effective method of driving retention

Don’t knowNoYes

Have you been contacted by your insurer about actions they

are taking to help customers manage costs as a result of

COVID-19?

23%

13% 13% 14%

22%24% 24%

22%

16%

4% 5% 6%

15%

10% 9% 10%

14-Apr 28-Apr 12-May 23-Jun 14-Apr 28-Apr 12-May 23-Jun

Likely to shop Likely to switch

Shopping / switching propensity by communication

23%

36%

35%

39%

45%

70%

56%

53%

51%

42%

7%

9%

12%

11%

13%

7-Apr

14-Apr

28-Apr

12-May

23-Jun

Contacted by carrier Not contacted by carrier

Shopping / switching increases

without contact from carrier

Shopping / switching reduces

with contact from carrier


Has your insurance company announced they will reduce

premiums or provide refunds during COVID-19?

Exclusive agents haven’t sustained the messageWhile off to a quick start, exclusive agent’s haven’t sustained delivery of the premium relief message while directs have continued to make contact and grow awareness, a key indicator of satisfaction

June 25, 2020

16

40%

50%

24%

59%

37%

63%

14-Apr 28-Apr 12-May 23-Jun

Exclusive Agents Independent Agents Directs

Have you been contacted by your insurer about actions they are

taking to help customers manage costs as a result of COVID-19?

40% 39%

20%

46%

32%

53%


Exclusive Agents Independent Agents Directs


6.076.26

4.29 4.37

5.34

5.33

5.62

4.54 4.515.29

5.34

5.56


Prior to COVID-19 After COVID-19

4.51 4.55

5.35 5.29

5.62

4.45

4.47

5.19

5.425.585.21

4.42

5.53

4.94

5.46

7-Apr 14-Apr 28-Apr 12-May 23-Jun

Expect driving to return to normal Expect to continue driving less Uncertain about future miles driven

Employment status continues to drive rate sensitivityConsumer rate sensitivity has returned to pre-COVID levels on average. Given close ties to employment status and financial anxiety, fiscal and economic developments moving into Q3 and Q4 could drive a greater bifurcation

June 25, 2020

17

Has COVID-19 changed your opinion of what is most important in your auto insurance?

(1)

Pri

ce

Qu

alit

y o

f C

overa

ge

(1

0)

Note: 1) Price v. Quality prior to COVID-19 no longer asked.

Hours reduced

Laid off /furloughed

No change

Salary reduced


Employment status impacts delayed paymentsEmployment status for 25% of auto insurance consumers has been impacted in some way since the onset of COVID. For those most impacted, awareness remains low and most have not explored options

June 25, 2020

18

Does your insurance company allow you to delay

payments due to COVID-19?

3%15% 14%

68%

4%20% 14%

62%

Yes, and I have delayed

payment(s)

Yes, but I have not

delayed a payment

No, not available Don't know

12-May 23-Jun

9%

9%

2%

5%

2%

2%

9%

20%

20%

14%

16%

21%

19%

19%

23%

23%

12%

12%

63%

52%

56%

58%

70%

64%

12-May

23-Jun

12-May

23-Jun

12-May

23-Jun

Yes, and I have delayed payment(s) Yes, but I have not delayed a payment No, not available Don't know

No change in

employment

Hours/salary

reduced

Laid-off /

Furloughed

Consumers exploring delayed payment by employment status45% 44%

55%

61%

35%37%

40%

52%

29%

36%39%

48%


Excellent Good Fair/Poor

Premium relief awareness by credit tier


Telematics interest remains high, but could collide with realityAlmost 60% continue to see fewer miles driven in the future despite increased in miles driven. Perceptions may have permanently changed, but driving the personal risk mitigation value proposition will be key to sustaining interest

June 25, 2020

19

Do you anticipate any changes to the average number of miles you

drive will remain after COVID-19?

38%

34%

21%

8%

7%

39%

36%

23%

2%

8%

38%

35%

24%

2%

10%

No, it will likely go back to normal

Yes, likely to reduce time in public

Yes, likely to continue working from

home for some time

No, it will likely increase before public

transport becomes safe

Don't know

14-Apr 12-May 23-Jun

80%65%

53%

56%

68% 66%

42%50%

49%

15%25% 23%

40%

23% 25%

52%43% 46%

7-Apr 12-May 23-Jun 7-Apr 12-May 23-Jun 7-Apr 12-May 23-Jun

Willingness to use Usage Based Insurance (UBI) by

Expectation for Future Miles Driven

More willing to try

About the same

Less willing

Don’t know what miles

driven will look likeExpect miles driven

to return to normal

Expect to remain

working from home /

spend less time in public

59%

59%


Rate / service expectations elevated due to satisfaction?While service expectations appear to have settled around pre-COVID levels, it is likely that the actual level of service expected is heightened due to broader reduced satisfaction—the bar is higher on a relative basis

June 25, 2020

20

3%

10%

4%

3%

9%

5%

8%

10%

6%

7%

10%

6%

3%

11%

5%

76%

66%

78%

71%

58%

74%

70%

58%

76%

71%

56%

76%

59%

60%

73%

21%

24%

18%

26%

32%

21%

22%

33%

18%

21%

34%

18%

38%

28%

22%

W7

W4

W1

W7

W4

W1

W7

W4

W1

W7

W4

W1

W7

W4

W1

Less important More importantThe same

Due to COVID-19, has the importance of your insurance relationship

changed due to any of the following...?

Competitive price

Access to a call

center 24/7

Online access/Self-

service 24/7

Excellent customer

service

Good coverage

options

With lower overall industry satisfaction, service

excellence will be heightened in relative terms

9%9% 9%

13%

10%10% 10%

16%

18%

32%

29%

27% 26% 26%

68%62%

51%47%

57% 56% 56%


J.D. POWER

Kyle Schmitt

J.D. Power

Vice President and Global Managing Director

Insurance Intelligence and Solutions

Contact Information:

+1 309 826 7958

[email protected]

Tom Super

Head of P&C

Insurance Intelligence

Robert Lajdziak

Senior Consultant

Insurance Intelligence

David Drotos

TransUnion

Vice President, Insurance Solutions


+1 440 804 6332

[email protected]

Ryan McMahon

Cambridge Mobile Telematics

Vice President, Insurance and Government Affairs


+1 857 366 2167

[email protected]

auto insurance and covid-19 consumer outlook and trends ins… · 25/06/2020 · when comparing...

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