State of Insurance Rating COVID-19 Weather Report #1

March 30, 2020 Laird Rixford

The end of March is approaching. And, the concern over COVID-19’s impact to the economy continues to compound.

The insurance industry is not immune to these concerns either. Many concerned agencies and carriers have reached out ITC to gain understanding of what is happening in the industry. Thus far in March 2020, we have collected more than 72 million carrier rates. Our business intelligence and analytical products provide valuable insight regarding the state of consumerism in the insurance industry.

The following weather report is for March 2 through March 27. ITC will continue to provide weekly weather reports through the coming months to give you a general baseline of your operations.

 

Methodology

ITC maintains a regular baseline of expected quoting volume in TurboRater, our comparative rating system. We built the baseline on a model that reflects multi-year historical performance, usership of the platform, state demographics, and market conditions.

The margin of error for the baseline averages less than 1.5% as calculated daily. The data analysis excludes rates returned without a premium.

Finally, the model only attempts to predict Monday through Friday agency operations. This is because weekends have too much variability.

 

Heavy Season

Traditionally, the insurance industry receives an uptick in quoting volume in late February and early March. This is due to the IRS delaying tax refunds that include the Earned Income Tax Credit or the Additional Child Tax Credit until that time. This uptick usually peaks during the first week of March. This year was no different as the heaviest day was March 2.

Weekly Rated Carriers

 

Week of 3/2

During week 10 of 2020, confidence remained high as American consumers and businesses were operating as normal. Variability within the stock markets remained nominal.

This was reflected in agency quoting numbers outperforming the model by 2.72%.

 

Week of 3/9

On March 9, the World Health Organization (WHO) contemplated classifying the spread of COVID-19 as a pandemic. The stock markets reacted with the Dow Jones Industrial Average falling 7.9% that day for its worst loss since October 26, 1987. The Dow closed out the week more than 10% lower than the previous Friday’s close.

Meanwhile, stories of the continued spread of the coronavirus and closures of school districts and municipalities filled the news. With this barrage of news, consumers reacted accordingly.

Agencies and carriers noticed the change immediately. A dip on Monday and a slight rise Tuesday and Wednesday was followed by a sharp decline on Thursday and Friday.  Quoting levels by the end of the were less than 5% of expected.

Quoting Performance Week of 3/9

By the end of the week, the World Health Organization has declared the outbreak a pandemic. Also, the U.S. government began pushing for the H.R. 6201: Families First Coronavirus Response Act. This precipitated widespread concern throughout the nation and eroded consumer confidence in a quick recovery.

On this day, ITC enacted its business continuity plan and initiated full work remote operations.

 

Week of 3/16

The third week of March continued the downward trend from the previous week. By this time, the markets and news media were in complete meltdown.

Consumer focus shifted from everyday matters to anxieties regarding shelter in place directives and toilet paper shortages. Even the passage of the aforementioned Act of Congress on March 18 failed to buoy consumer trust.

Quote volumes continued to plunge throughout the week as agent’s traffic dwindled and offices began closing due to local ordinances. While starting the week 14% below the model’s prediction during a normal year, by Friday the week ended nearly 29% lower than expected. This drop troubled many agencies as their quoting activities dropped significantly. Many looking for the bottom.

Quoting performance week of 3/16

I noticed something interesting. The decline in expected quoting volume directionally tracked closely with the Dow’s linear trendline. This leads to a possible correlation in market performance and consumer confidence surrounding the purchase of insurance.

 

Week of 3/23

Week 13 provides the first bit of positive news since the first week of the month. The delta in quoting volume versus the expected stemmed its freefall. While it settled at a weekly average of 31% below expectations, it also began to show a barely perceptible positive trendline.

Throughout the week, the variance versus predicted quoting volumes continued to track closely with the Dow performance. The anticipation of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) continued to influence the financial markets. President Trump signed the CARES Act into law on March 18, 2020, after the markets closed.

 

Premiums & Payment Amounts

Throughout the review, there was not a perceptible change in average policy premium and payment amounts during the observation period.

Premium and Payment amounts

As premiums and payment amount remain steady, agents should continue to find ways to engage clients who are concerned about their finances during this time. There are many ideas on how you can engage your clients outside of a normal inbound quoting flow to reverse a downward trend in new business.

These include active outbound renewal and rewrite campaigns to engage customers during a period where they might feel a financial strain. Throughout the month of March, many agents heeded this advice by actively increasing their rewrite business with a 233% increase in rewrite activities.

 

Forecast

The CARES Act might encourage a positive trend within the markets. However, additional measures to further contain the spread of the disease will assuredly continue to influence customer confidence. Extensions to shelter in place orders, school closings and social distancing will continue to affect insurance agencies and the carriers that support them.

We predict that quoting volumes will remain 30-35% lower than expected through this week. Therefore, agencies should continue to be vigilant in their quoting efforts. Find ways to engage your clients who are concerned about their finances during this time. Consumers continue to need insurance; they just might question as to why. Be prepared when they ask.

Agents are a resilient bunch. You have seen multiple swings in the market throughout the years. This is yet another one.

Focus on good sales habits and impeccable retention. Use this time to enhance your usage of technology and work on building a strong digital presence.

With the uncertainty in the world today, remember you are a trusted advisor to your clients. They need you just as much as you need them.

As you share in their pain, try to solidify that lifetime client experience you pride yourself in. Be there for them today and every day after.

 

Next Report

Stay tuned. Next week’s report will include a recap of this week and a review of COVID-19’s impact on online transactions. Plus, I’ll share impact report by state detailing the largest impacts on a state level.

 

About the Author

Laird Rixford

As CEO, Laird Rixford is responsible for providing strategic direction and leadership for the company. Rixford has a proven executive management track record and has more than 20 years of experience in entrepreneurship and insurance technology. An expert in insurance technology and marketing, Laird is a recognized public speaker and has presented at industry events across the United States.

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