If 2024 was the year of sky-high insurance premiums, 2025 is shaping up to be the year when everyone shops for a lower rate, according to J.D. Power's December 2024 “Insurance Intelligence Report."

In July 2024, auto insurance rates were up 11% year over year, according to the report, while homeowners and renters insurance costs exceeded the rate of inflation, according to the Bureau of Labor Statistics. As a result, the shopping rate climbed to “a record high of 6.8% through the second quarter of 2024, up from 5.9% two years ago," said Breanne Armstrong, director of insurance intelligence at J.D. Power.

With rates rising across the board, nearly half (49%) of U.S. auto insurance customers said they were shopping for a new plan. By the third quarter of 2024, auto insurance shopping rates had reached a record high. However, with virtually every carrier increasing rates, shoppers had very few alternatives and many stayed put.

Now, that's all about to change.

“The insurance rate inflation everyone experienced over the past two years was driven by a perfect storm of increased frequency and severity of damage to property, increased costs in the raw materials needed to conduct those repairs, and longer repair cycle times, all of which increased costs for insurers," the report said. “Thanks in part to all the premium increases introduced to combat this trend, however, property & casualty insurance profitability started to improve throughout the second half of the year."

“That will likely make 2025 a major tipping point for policy shopping and switching," the report explained. “After the past three years spent shoring up their operations and scaling back growth initiatives, insurers are going to be on the hunt for new customers in 2025 and all indications are that customers will be more than willing to comparison shop their policies and jump ship for a better rate."

Policy shopping activity hit a record high of 13.8% in September, according to J.D. Power's quarterly LIST Report for the third quarter of 2024. Since then, shopping rates have stayed elevated, hitting 13.8% again in October and dipping slightly to 13.6% in November. Switch rates also increased, peaking at 4.6% in August. As more competition starts to heat up between carriers, switch rates may increase further in 2025.

Meanwhile, usage-based insurance (UBI) is poised for broader adoption. While only 17% of drivers currently opt for UBI—double the rate from eight years ago—the percentage of customers being offered UBI dipped in 2024, with just 15% of shoppers being given UBI options, down from 22% in 2023.

However, UBI participants report significantly higher satisfaction, averaging 64 points more than non-UBI customers on a 1,000-point scale. Increasing shopping trends could signal a surge in UBI adoption in the future.

“The bump in customer satisfaction that's coming from UBI, combined with a surge in rate-driven shopping and switching activity and continued interest among insurers in courting new customers, have set the stage for a significant jump in UBI adoption," the report said.

While the trends shaping up in 2025 could spell some relief for consumers who have been suffering significant rate increases for the better part of three years, they will make for a volatile year for carriers, the report predicted. “With costs not likely getting any lower and customers consistently demanding more—and voting with their wallets to get it—we're likely to see a price battle emerge throughout the year," the report said.

Will Jones is IA editor-in-chief.