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
© 2020 J.D. Power. All Rights Reserved.
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
© 2020 J.D. Power. All Rights Reserved.
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
© 2020 J.D. Power. All Rights Reserved.
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
© 2020 J.D. Power. All Rights Reserved.
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
© 2020 J.D. Power. All Rights Reserved.
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.
© 2020 J.D. Power. All Rights Reserved.
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%
© 2020 J.D. Power. All Rights Reserved.
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
© 2020 J.D. Power. All Rights Reserved.
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
© 2020 J.D. Power. All Rights Reserved.
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
© 2020 J.D. Power. All Rights Reserved.
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
© 2020 J.D. Power. All Rights Reserved.
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
© 2020 J.D. Power. All Rights Reserved.
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
© 2020 J.D. Power. All Rights Reserved.
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%
14-Apr 28-Apr 12-May 23-Jun
Exclusive Agents Independent Agents Directs
© 2020 J.D. Power. All Rights Reserved.
6.076.26
4.29 4.37
5.34
5.33
5.62
4.54 4.515.29
5.34
5.56
24-Mar 31-Mar 7-Apr 14-Apr 28-Apr 12-May 23-Jun
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
© 2020 J.D. Power. All Rights Reserved.
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%
14-Apr 28-Apr 12-May 23-Jun
Excellent Good Fair/Poor
Premium relief awareness by credit tier
© 2020 J.D. Power. All Rights Reserved.
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%
© 2020 J.D. Power. All Rights Reserved.
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%
24-Mar 31-Mar 7-Apr 14-Apr 28-Apr 12-May 23-Jun
J.D. POWER
Kyle Schmitt
J.D. Power
Vice President and Global Managing Director
Insurance Intelligence and Solutions
Contact Information:
+1 309 826 7958
Tom Super
Head of P&C
Insurance Intelligence
Robert Lajdziak
Senior Consultant
Insurance Intelligence
David Drotos
TransUnion
Vice President, Insurance Solutions
Contact Information:
+1 440 804 6332
Ryan McMahon
Cambridge Mobile Telematics
Vice President, Insurance and Government Affairs
Contact Information:
+1 857 366 2167