No industry is safe during a recession and the car insurance industry is certainly no exception. Though drivers still need coverage for their vehicles during tough economic times, the car insurance market was negatively impacted by the recession. As credit froze and more consumers found it difficult to access loans, demand for recession car insurance policies went down. Car insurance rate changes spread across the industry and consumer patterns were altered as the market attempted to adjust to a harsher economic environment.
Changes in Car Insurance Premiums
Industry investment practices heavily impacted car insurance premiums during the recession. To cover the cost of insurance claims, companies invest a portion of their premiums in the stocks and bonds markets. However, many companies lost a significant percentage of their investments when the stock market crashed. To compensate for their loss, insurance companies across the industry raised their premium rates.
However, premium adjustments varied from state to state. In order to retain customers, many companies kept rates low for selected insurance pools. Others adjusted rates so that many states offered lower premiums. While many policyholders saw their premiums go up, the market also featured premiums at an all time low. This disparity of prices expanded options for consumers.
The Impact of the Recession on Car Insurance Demand
Decreased consumer spending impacted the car insurance industry in a direct and indirect manner. Lack of available credit resulted in lower automobile sales, which negatively impacted all related industries. Consumers purchased fewer cars and, as a result, purchased fewer new car insurance policies.
Other factors contributed to a decrease in purchased car insurance plans. Households affected by unemployment were forced to cut back on expenses and many opted to keep only one car insured.
Recession Influences on Consumer Shopping Trends
A surge in policy shopping impacted reflected trends in the car insurance market. While the recession caused policy sales to decrease across the industry, not all car insurance companies were adversely affected. In fact, some car insurance companies came out of the recession as winners. The market favored policy providers that offered lower premiums. In order to cut down on household expenses, more consumers shopped for cheaper policies during the recession. Discount car insurance providers attracted new clients as a result of the economy.
The economic recession produced market trends that made ripples throughout the insurance industry. The market conditions created challenges for both consumers and insurance companies. In general, insurance holders saw premiums increase while insurance providers saw a decrease in the numbers of policies purchased. Companies that offered cheaper recession car insurance saw an increase in clients. These car insurance rate changes, along with alterations in consumer habits, will endure long after the recession.