US consumer auto insurance shopping continued at a strong pace in the first quarter of 2025, according to the latest Insurance Demand Meter released by LexisNexis Risk Solutions.
The report noted that auto policy shopping growth reached 16%, while new policy growth stood at 8.4%, both declining slightly from the fourth quarter of 2024.
The increase in shopping activity was largely supported by the direct distribution channel, which recorded a 34% year-over-year rise. This channel outpaced growth seen in both independent and exclusive agent channels.
A 30% uptick in the non-standard market segment also contributed to the rise, with tax refund season bringing more uninsured individuals into the market.
As premiums continue to climb – having risen 12.7% over the past year to a national average of $2,101 annually – more consumers are actively comparing policies to manage costs. Approximately 49% of drivers have shopped for new policies in the last year, and those who switched insurers reported median annual savings of $461. This behavior has reinforced direct channel strength, as many consumers turn to digital tools for faster comparisons and quotes.
The shorter month of February dampened some momentum compared to Q1 2024, which had an extra business day due to the Leap Year. Despite this, several regions saw marked increases in shopping volume. Ten states experienced growth of 20% or more, including Hawaii (59%), New Jersey (43%), Washington (33%), and Massachusetts (31%).
Jeff Batiste (pictured), senior vice president and general manager for US auto and home insurance at LexisNexis Risk Solutions, said macroeconomic influences such as tax refunds and tariff expectations are shaping shopping patterns.
"We also are seeing traditionally stable, high-value customer segments become more active in the market. That underscores a potential need for insurers to re-evaluate how they engage and retain policyholders who may have previously been considered low churn risks,” Batiste said.
New policy issuance was supported by consumer behavior in March, driven in part by tax refund availability and a rise in vehicle purchases ahead of expected price increases from tariffs.
Internal data from LexisNexis Risk Solutions pointed to this preemptive activity as a key driver. Notable growth in new policies occurred in Nevada (39%), New Jersey (31%), and New York (30%).
The prospect of higher vehicle prices has been linked to new import tariffs, which industry analysts estimate could add as much as $15,000 to the cost of certain vehicles. This development is projected to push the average annual insurance premium beyond $2,750.
Insurers, facing as much as $53 billion in added costs due to the tariffs, may adjust pricing models to reflect increased vehicle replacement and repair expenses. The potential for inflation in coverage costs is prompting earlier-than-usual purchases and policy initiations by cost-conscious consumers.
Policyholder retention continued to decline as competitive pricing and marketing efforts contributed to increased switching. Average policy retention fell to 78% by the end of the quarter, down from 83% at the start of 2022. Policies are now changing hands at a rate nearly 30% higher than in 2021, translating to roughly 6 million more annual switches.
Segments that have traditionally exhibited loyalty, including policyholders aged 66 and older and those with more than a decade of tenure, have become increasingly active in shopping and switching. The trend suggests a need for insurers to reassess retention approaches for previously low-risk segments.
Consumers aged 66 and up recorded the largest year-over-year growth in shopping activity at nearly 20%. In contrast, the 26–35 age bracket showed the lowest growth at just over 13%. Fixed incomes and increased rate sensitivity were cited as possible factors influencing behavior among older consumers, who have historically maintained long-term coverage relationships.
LexisNexis Risk Solutions indicated that while the full impact of tariff measures may not emerge until later in the year, current pricing pressures are already prompting earlier purchases of vehicles and other goods.
"Carriers are achieving notable underwriting results but continue to face significant retention challenges. Declining retention rates may force carriers to replace lost policies to sustain growth, which could strain their current business models," Batiste said.
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