Home and renters insurance shopping likely to keep rising

The fourth quarter of 2022 saw an increase in auto insurance shopping that amounts to a recovery, not growth – and increasing shopping for home insurance is likely to persist in 2023, according to a new insurance trends report by TransUnion.

Holding the line on rents and housing prices, or cutting them, may remain tough this year, according to Michelle Jackson, senior director of personal property and casualty insurance in the insurance practice TransUnion. Jackson is an author of the report, “2023 Q1 Insurance Personal Lines Trends and Perspectives.” 

Michelle Jackson, senior director of personal lines market strategy at TransUnion

“If rent prices start to come down a little bit, then people can start moving again. They were locked in for a while with high prices where they weren’t moving,” she said. “As costs continue to rise and are not expected to come down in 2023 — the cost of vehicles, the cost of a home – the question is, will shopping for price continue to persist enough that it will outweigh the fact that people aren’t necessarily buying the way they used to.”

Rising inflation at the end of 2022 made premium costs a reason to shop for both auto and home insurance, Jackson stated. At the same time, “inflation kept going up and then carriers were taking rate increases,” she said. “It drives shopping higher than things like coverages or digital quote experiences.”

The rates for renters insurance began decreasing year-over-year in November 2021, finally dropping by 20% in July 2022, but then rebounding until they increased by 1% in January. While lower-risk policyholders are less likely to shop because of price changes, according to Jackson, higher-risk policyholders are very price driven.  

“They will shop and switch all the time, always striving for that cheapest price,” she said. “We’re seeing the shopping rates go up on a year-over-year basis. Rates have been increasing so much just because of loss costs rising and carrier rates. Rates are going up 5, 10, 15 or 20%. It’s driving more and more consumers to just be more price sensitive around what they’re paying.”

According to TransUnion, homeownership is not looking much better. Its 2023 Consumer Credit Forecast predicted a 24% increase in home equity originations – meaning homeowners who cannot afford new homes are instead funding home renovations by borrowing against their home’s value.

Also, carriers can expect a rise in auto claims, which makes the auto insurance space more vulnerable, according to TransUnion’s trends report. 

In this insurance market climate, insurers’ next move appears to be focusing on cyber incident insurance, especially because 95% of cyber incidents can be resolved by incident response teams without having claims, as TransUnion’s insurance trends report stated. 

“In a time of profitability constraints, insurers are looking for ways to provide value-add services. Roadside assistance is a legacy version of that. Today it’s cyber coverage,” Jackson said. “For personal lines, we see much more issues resolved from the incident response compared to commercial.”