Drivers are shopping for better car-insurance rates. Few are finding them.

By Venessa Wong

'We need regulators to do a better job limiting insurers' endless demands for rate hikes,' one consumer advocate says

Years of rising auto-insurance premiums have fueled a surge in drivers shopping for new plans - but finding better deals has been difficult as prices remain elevated across the board, according to new research from J.D. Power.

While the share of people shopping for a new plan in the last 30 days hit 13.3% during the second quarter - the highest since J.D. Power began its survey in 2020 - only 3.9% said they had switched insurers in the past month, up slightly from 3.6% two years ago.

"It is tough right now to find that lower premium," said Stephen Crewdson, a senior director at J.D. Power's global insurance intelligence group. "The switch rate would likely be even higher if better deals were easily found." As every major insurer has been aggressively increasing premiums, consumers who are switching may now be settling for smaller savings than they'd want, he said.

While these monthly figures don't reflect how many drivers will switch insurers over the entire year, Crewdson said that in bad years for the industry when more drivers want to change insurers, 13% to 15% of households switch, compared with 9% to 10% in years when customers are more satisfied.

Americans now spend an average of $2,278 a year on auto insurance, up from $1,674 in 2021, according to Bankrate data on rates for single, 40-year-old drivers with clean driving records and good credit. Much depends on the make and model of one's vehicle; for example, the average cost to insure a Subaru (JP:7270) (FUJHY) Outback is $1,819 a year (or $152 a month), compared with $3,341 a year (or $278 a month) for a Tesla (TSLA) Model 3.

Some drivers are reducing their auto-insurance coverage

Shopping around is typically one of the first ways people try to save on auto insurance. Without cheaper options, some drivers are reducing their coverage, Douglas Heller, director of insurance for the Consumer Federation of America, recently told S&P Global Market Intelligence - including by eliminating liability coverage, which helps drivers at fault pay for another person's injuries and property damage, and comprehensive coverage, which covers losses related to noncollision accidents such as theft, fire, hail or vandalism.

American drivers may be making these choices as they're struggling to afford higher prices for other expenses like food and medicine, he said.

"I absolutely understand why people are [reducing or eliminating their coverage] given the incredibly high prices, but I always want to make sure people appreciate that they are taking on more risk - and that increases the amount they will have to pay if the unforeseen and unfortunate happens," Heller told MarketWatch. "We need regulators to do a better job limiting insurers' endless demands for rate hikes. Shopping can help, but the public would benefit substantially from better oversight of the insurance companies."

While some metrics that affect premium rates are starting to improve, "we believe it will still take some time for these improvements to be reflected in flattening premium rates," said Scott Holeman, a spokesperson for the Insurance Information Institute, an industry trade group.

"The current hard market wasn't created overnight," Holeman told MarketWatch in an email. "Current insurance pricing reflects a combination of several factors including: driving behavior, the cost of replacements parts and supply chain issues, and inflation. For the last few years, insurers have been paying out more in claims than they've been bringing in via insurance premiums. That's not a sustainable business model."

How to save money on car insurance

In addition to comparison shopping for rates, Holeman said, consumers should talk to friends and family members about their experiences with insurance and claims.

"The lowest-priced policy may not fit a consumer's needs," he said. "Ask your insurance professional what you can do to lower rates and whether you qualify for any discounts."

Other ways for drivers to reduce their premiums include requesting higher deductibles; reducing coverage on older cars to reflect their lower value; and, for drivers who don't drive many miles per year or who carpool, asking for low-mileage discounts, according to the Insurance Information Institute. For those buying a car, it is typically less expensive to insure cheaper vehicles.

From the archives (February 2024): Car-insurance rates have soared 43% since 2022 and are expected to continue to climb. Here's how to lower your premiums.

Despite drivers' efforts to save money, premiums are expected to keep climbing in 2024 as insurers continue to file for higher rates with state insurance regulators. In February, insurers filed for an average rate increase of 13.7%, according to J.D. Power, which was the biggest such hike in decades.

Still, J.D. Power's Crewdson said he expects lower hikes overall than drivers have seen the last two years, as insurers reverse some of the losses they've experienced and data indicate a return to profitability this year. Geico (BRK.A) (BRK.B), Allstate (ALL) and Progressive (PGR) have all reported improving profitability in 2024.

J.D. Power said in its report that "2024 should continue to be a year of transition - profitability should continue to improve, and competitive pressures will likely increase."

Despite improving financials for insurers, "I wish I could say we see a future where the premiums are going to come down - but I don't see that right now," Crewdson said.

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-Venessa Wong

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07-25-24 1056ET

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